Definition
ITC.
Credit for tax paid on inputs used in business.
Statutory Definition
GST Law.
Etymology & Origin
A core concept of value-added taxation systems worldwide, designed to prevent the 'cascading' effect of taxes by allowing businesses to offset taxes paid on purchases against taxes owed on sales.
Full Legal Analysis
Input Tax Credit (ITC) is the backbone of the Goods and Services Tax (GST) regime. It refers to the tax a business pays on a purchase (input) which it can use to reduce its tax liability when making a sale (output).
By allowing ITC, the GST system ensures that the tax burden is passed entirely to the final consumer, and businesses only pay tax on the 'value addition' they create.
ITC is not an absolute right but a concession granted under the statute, subject to strict procedural compliance. Matching of input credits with the supplier's outward returns (GSTR-2A/2B matching) is a critical compliance area.
The Supreme Court established that ITC is a statutory concession, not a fundamental right, and must be claimed strictly within the time limits and conditions prescribed by law.
Denial of ITC due to supplier defaults is a major area of litigation. Advocates often rely on the doctrine of impossibility of performance when a bona fide purchaser is denied credit because their vendor failed to deposit the tax.
This Term in Indian Statutes
Central Goods and Services Tax Act, 2017, 2017
"Eligibility and conditions for taking input tax credit."
The fundamental provision outlining how and when a taxpayer can claim credit.
