Input Tax Calculator

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Tally Solutions, Nov-22-2019

Input Tax Credit Calculation

Input Tax Credit is the soul of GST. The reason behind the same is that, in the GST era, businesses will be allowed avail ITC across the state's borders and can be used to meet the output tax liability. This requires businesses to attach extra care towards input tax calculation. Availing the right ITC will ensure that the working capital of the business is maintained properly, and also help to maintain the credibility of the business.

Tax Calculation under GST

Under GST, the taxes applicable are CGST, SGST/UTGST & IGST.

  • For intra-state transactions: CGST + SGST/UTGST will be availed
  • For inter-state transactions: IGST will be availed

For all such transactions, whenever a business pays a particular tax, the appropriate amount will get apportioned to the respective electronic ledger, which can then be used to meet the future tax liability.

How is Input Tax Credit Calculated?

In order to calculate input tax credit, the following rules need to be adhered to:

Old ITC Set-off order

  • Amount of Input Tax Credit on account of IGST shall first be utilized for the payment of IGST then for payment of CGST and then for payment of SGST / UTGST.
  • Amount of Input Tax Credit on account of CGST shall first be utilized for the payment of CGST then for payment of IGST. Such amount cannot be used for payment of SGST / UTGST.
  • Amount of Input Tax Credit on account of SGST / UTGST shall first be utilized for the payment of SGST / UTGST then for payment of IGST. Such amount cannot be used for payment of CGST.
  • SGST / UTGST payable or Input tax credit of SGST / UTGST will be calculated state-wise i.e. ITC of SGST in one state cannot be utilized for payment of SGST of another state.
  • Input tax credit cannot be used for payment of interest, penalty, fees or any amount payable under the act other than the GST in the manner mentioned above.

New ITC Set-off order from April 2019

Input tax credit

IGST Output liability

CGST Output liability

SGST Output liability

IGST

(I)

(II) – In any order in any proportion

(III) Input tax credit on account of Integrated tax to be completely exhausted mandatorily

CGST

(V)

(IV)

Not allowed

SGST/UTGST

(VII)

Not permitted

(VI)


With the new rule, the IGST credit needs to be completely utilised before offsetting it with CGST or SGST. The order of setting off ITC of IGST can be done in any proportion and any order towards setting off the CGST or SGST output after utilising the same for IGST output.

Your Input Tax Calculator – Invoice Matching Mechanism

  • A matching mechanism has been developed to make sure there is no duplication in claiming ITC.
  • It ensures that inward supplies return filed by receiver match outward supplies returns filed by supplier.
  • Based on the same, each business can devise their own GST payment calculator– to determine the amount of output tax to be met via ITC and the amount of output tax to be paid via cash.
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