Q.What is Input Tax Credit (ITC)? A trader buys goods for Rs 60,000 and sells them for Rs 90,000, both intra-state at 18% GST. Compute the net GST payable to the government.

Input tax credit lets a business subtract the GST paid on purchases from the GST collected on sales, so tax is really paid only on the value added. …

Meaning of ITC. Input tax credit is the credit a registered business gets for the GST it pays on its purchases (input tax). It sets this off against the GST it collects on its sales (output tax) and pays the government only the difference. This removes tax-on-tax (cascading), so tax is effectively borne only on the value added.

Net GST payable = Output tax - Input tax credit.

Computation (both transactions intra-state at 18% → CGST 9% + SGST 9%):

Net CGST = 8,100 - 5,400 = Rs 2,700. Net SGST = 8,100 - 5,400 = Rs 2,700. Net GST payable = 2,700 + 2,700 = Rs 5,400. …

Value-added shortcut: since both legs are at the same rate, apply the rate directly to the value added — 18% of (90,000 - 60,000) = 18% of 30,000 = R …

Do not pay the whole output tax (Rs 16,200) to the government — the input tax credit of Rs 10,800 is first set off. Also, set CGST against CGS …