What is input tax credit?
It is the credit for tax paid on inputs. Every dealer has to pay output tax on the taxable sale effected by him. The basic formula of VAT is that every dealer pays tax only on the value addition in his hands. In simple words input tax credit is the mechanism by which the dealer is enabled to set off against his output tax, the input tax. Dealers are not eligible for input tax credit on all inputs. There are certain restrictions and conditions on the eligibility of input tax credit as it is stipulated in the respective State legislation.
