Input Tax Credit under Revised Model GST Law 2016

Input Tax Credit under Revised Model GST Law 2016


In the present indirect taxation system, cascading of tax is significant due to non-availability of ITC at various stages. Following are certain instances of such cascading of taxes

  • Permits restricted inter levy credits between Excise and Service Tax.
  • No input tax credit of Central Sales Tax, Entry Tax, Octroi and Luxury Tax,;
  • Input tax credit of VAT is not available to manufacturers and service providers;
  • Input tax credit of Central Excise duty, service tax & CVD is not admissible to dealers in
  • No input tax credit of Swachh Bharat Cess available and
  • No Cenvat credit of Krishi Kalyan Cess to manufacturers

One of the basic tenets of proposed GST regime is seamless flow of input tax credit across the value chain right from manufacturer to the final consumer. This will result in equitable distribution and efficient allocation of economic resources. Under GST law, ITC will follow supply chain not only in intra-State transactions but also in inter-State transactions. Further, credit of tax paid at the time of import of goods and services would also be creditable. This is expected to result into significant reduction in cascading of taxes.

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