How is input tax credit to be claimed? Is there any requirement of a `one to one correlation between input tax and output tax?
There is no need for a `one to one’ correlation between input tax credit and output tax. Quite a number of small businesses are under the misconception that input tax has to be adjusted against output tax on a bill to bill basis. The operation of the input tax mechanism is simple. The dealer will be eligible to take credit for the eligible input tax in a tax period as specified on the entire purchases. He will charge VAT at the prescribed rate as is done in the present system for levy of sales tax. The VAT or output tax payable is compiled on a monthly basis as is done now. The dealer can adjust the input tax eligible on the entire purchase in the tax period against the output tax payable irrespective of whether the entire goods purchased are sold or not. For example, if the input tax credit in a particular month is Rs. 1,000 and the output tax payable is Rs. 500, the excess input tax of Rs. 500 can be carried forward to the next tax period. Assuming no further input tax credit in the
Related Questions
- Can a dealer whose input tax credit exceeds the output tax payable in tax period or in a year claim refund of the excess credit of input tax?
- How is input tax credit to be claimed? Is there any requirement of a `one to one correlation between input tax and output tax?
- How is input tax credit to be claimed? Is there any requirement of a one to one correlation between input tax and output tax?
