Question

Q. The term ‘Input Tax Credit’ is used in relation to

• A. Tax on Supply and demand of agricultural products.
• B. Net compensation to Government employees.
• C. The deduction of the input tax from the output tax
• D. Net retained earnings of resident companies abroad.

Answer 1

The correct option is C The deduction of the input tax from the output tax

Explanation:

• Input Tax Credit is an aggregate total amount of tax paid by a registered dealer on the total purchases made by him within the State from other dealers.
• When a trader pays GST at the time of purchase, it is called Input Tax and he collects GST at the time of sale which is called Output Tax. At the time of paying GST to the government, a trader deducts the input tax from the output tax and pays the remaining tax. This deduction of input tax is called Input Tax Credit.