You’ll be able to claim input tax credits (ITC) under GST on the purchases you make and resell as part of your business. The ITC is an adjustment that reduces the amount of VAT you pay on your own business purchases. These credits are only available if you maintain detailed records of all your purchases in a logbook. Without those records, you may not be able to claim them. If you don’t maintain such records, you’ll need to start by reviewing past purchases and identifying which of those qualify as inputs for your business so that you can begin tracking from this point forward. There are specific time limits for claiming the ITC on these purchases. Here’s what you need to know about the GST time limit for input tax credits, and what actions you should take to avoid paying more than necessary when filing your return.
If you want to claim ITC on your purchase, it’s important that the supplier is paid in full within 180 days of delivery. If the purchaser does not, the credit they have received will be applied to their outgoing tax obligation. The purchaser is required to make payment for the provision of goods and/or services within 180 days of the invoice date.
What is Input Tax Credit under GST
An input tax credit is a credit which is available to businesses for the taxes paid on purchases related to the business. This means that if you buy something for your business and the tax rate on that item is, say, 10%, then you only have to pay 11% GST on that purchase. The business owner can take an input tax credit on that 10% tax paid, applying it towards his own GST payment. This way, you only pay the GST on your business’s net purchases, after accounting for the applicable ITCs.
Input Tax Credit (ITC) is a major benefit under the Goods and Services Tax (GST) regime. It allows businesses to reduce their tax liability by claiming credit for Input Taxes paid on purchases made for business purposes.
Maximum time limit to avail Input Tax Credit (ITC) under GST Credits?
If you want to claim ITC on your purchase, it’s important that the supplier is paid in full within 180 days of delivery. If the purchaser does not, the credit they have received will be applied to their outgoing tax obligation.
The maximum time limit to claim input tax credit is 4 years from the end of the month during which the purchase was made. This means that you have 4 years from the date that you file your GST return to claim ITC on these purchases. There are two important notes to keep in mind: Firstly, not all businesses have to file returns. Secondly, this time limit only refers to the time allowed for claiming the ITC, not for keeping the records. The record-keeping time limit is discussed in the next section.
In order to avail of ITC, businesses must meet certain conditions laid down by the GST law. conditions to avail input tax credit under GST:
+ The buyer must be registered under GST
+ The invoice must be from a registered supplier
+ The goods or services must have been used for business purposes
+ The Input Tax Credit can only be claimed for taxes paid on invoices issued within 12 months from the date of supply
+ The Input Tax Credit can only be claimed for taxes paid on invoices issued within the financial year
+ The Input Tax Credit can only be claimed if the supplier has filed a return for the relevant period
The Input Tax Credit can be availed by businesses for taxes paid on purchases made in the course of their business operations. ITC can be claimed on both local and interstate purchases, as well as imports. ITC can be claimed for taxes paid on both goods and services.
However, there are some restrictions on claiming ITC. Businesses cannot claim ITC for taxes paid on purchases made for personal use, or for Inputs that are used to create exempt supplies. Additionally, ITC cannot be claimed for taxes paid on services received from unregistered suppliers.
Record-keeping is key to claiming ITCs
If you want to take advantage of claiming ITC, you will first have to maintain a record of all your purchases. The GST law says that you have to maintain records of all the inputs you purchased for your business for at least 5 years from the end of the relevant tax period. The relevant tax period refers to the period for which the ITC is claimed. For example, if you file your return in February 2020, the relevant tax period is the one ending on 31 March 2020. And the 5-year record-keeping period ends on 31 March 2025. When you make a purchase for your business, make sure you keep the original invoice and record the following information in your logbook: – The GSTIN of the supplier – Every supplier has a GSTIN or Goods and Services Tax Identification Number. – The date of purchase – When did you make the purchase? – The amount of purchase – How much did you spend on the purchase? – The description of the purchase – What did you buy? – The address of the supplier – Where did you buy the product?
What Happens if You Don’t Maintain Records?
If you don’t maintain records of the inputs purchased, you will not be able to claim ITC. And if you do claim I-ITC, but are unable to produce records to prove it, then you will be liable to pay GST. So, it is extremely important to maintain records of your purchases. This will help you avoid paying more GST than necessary. And if you make an error while filing your return, you will have proof of your ITC to present to the tax authorities.
How to determine the time limit for claiming your ITC?
The time limit for claiming ITC is different for each business type. The time limit is calculated from the end of the month during which the purchase was made. Here are some time limits for various business types: – If you are a service provider, you have to claim the input tax credit within 3 months from the end of the month during which the purchase was made. – If you are an input dealer, you have to claim the input tax credit within 2 months from the end of the month during which the purchase was made. – If you are a manufacturer, the time limit is 5 years from the end of the month during which the purchase was made.
What happens if you miss the time limit for claiming ITC?
If you miss the time limit for claiming ITC, you will have to pay GST on the value of those purchases. You also have to pay interest on the amount that you owe to the government. To avoid paying more GST and interest, you can file a late return on Form GSTR-9. Make sure to mention the reasons for filing a late return. You should also be prepared to pay interest on the GST that you owe. If you are a small business, GST filing is simple. You have to file a single return for the entire financial year. If you have been in business for less than a year, you have to file quarterly returns.
The time limit for claiming input tax credits is different for each business type. You have to maintain records of all your purchases in order to claim ITC. If you miss the time limit for claiming ITC, you will have to pay GST on the value of those purchases.