The correct answer is: D. All of the above
Input tax credit (ITC) is a mechanism under the Goods and Services Tax (GST) regime that allows businesses to claim credit for the GST they have paid on inputs used in the manufacture or production of goods or services.
ITC can be used to offset the output tax liability on supplies made by a business. The ITC can be claimed in the following order:
- ITC of CGST is first utilized for payment of CGST.
- The balance ITC of CGST can be utilized for payment of SGST/UTGST.
- The balance ITC of CGST and SGST/UTGST can be utilized for payment of IGST.
For example, if a business has paid Rs. 100 as CGST on inputs used in the manufacture of goods, it can claim Rs. 100 as ITC of CGST. This ITC can be used to offset the output tax liability on supplies made by the business. If the output tax liability is Rs. 50, the business will only have to pay Rs. 50 as CGST. The balance ITC of Rs. 50 can be carried forward to the next financial year.
The ITC of CGST and SGST/UTGST can also be used to pay IGST. For example, if a business has paid Rs. 100 as CGST and Rs. 100 as SGST on inputs used in the manufacture of goods, it can claim Rs. 200 as ITC of CGST and SGST/UTGST. This ITC can be used to offset the output tax liability on supplies made by the business. If the output tax liability is Rs. 300, the business will only have to pay Rs. 100 as IGST. The balance ITC of Rs. 100 can be carried forward to the next financial year.