Q.What is Input Tax Credit? Explain its importance under GST.

Input Tax Credit is the single mechanism that stops GST from taxing the same value over and over again as goods move through the supply chain. …

Input Tax Credit (ITC) allows a registered dealer, who has paid GST on goods/services purchased for use in their business (inputs), to claim credit for that tax, and set it off against the GST they must themselves collect and pay on their own sales (outputs).

Why it matters: without ITC, GST paid at an earlier stage of the supply chain would simply become another cost baked into the price at the next stage, which would then itself attract GST again — a cascading, tax-on-tax effect, exactly the problem the old pre-GST system suffered from. With ITC, each dealer along the chain effectively pays GST only on the value they themselves have added, since the tax already paid by their supplier is credited back to them. This keeps the overall tax burden on the final consumer equal to the single GST rate applied to the final sale price, no matter how many stages the good passed through on its way to them. …

Believing ITC is a refund of tax paid — it is a CREDIT/set-off against the dealer's own output tax liability, not a cash refund (except in specific s …