Question

Q. Which of the following statements best describes the term “Input Tax Credit”:

• A.
  Goods and services on which 0% GST is applicable.
• B.
  The tax already paid on inputs, which can be reduced at the time of paying tax on output.
• C.
  Goods and services which are exempt from payment of GST.
• D.
  Entitlement of claiming refund of GST paid by the suppliers exporting Goods or services to Special Economic Zones.

Answer 1

The correct option is B

The tax already paid on inputs, which can be reduced at the time of paying tax on output.
Explanation:

Option (a) is incorrect: Goods and services on which 0% GST is applicable are called NIL Rated Supplies.

Option (b) is correct: Input tax credit means at the time of paying tax on output, we can reduce the tax already paid on inputs.

Option (c) is incorrect: Goods and services which are exempt from payment of GST are called as Exempt Supplies.

Option (d) is incorrect: Goods or services which are exported or supplied to SEZ are called Zero-Rated Supplies. The suppliers making Zero-rated supplies are entitled to claim refunds, but are not called as Input Tax Credit.