As India’s good and services tax (GST) regime approaches its ninth anniversary, it is undoubtedly clear that it has been a landmark reform that has reshaped the country’s indirect tax landscape. From subsuming multiple taxes into a unified system to building a technology-led compliance framework, GST has significantly improved transparency and formalisation across sectors. A key pillar of this framework is the removal of the cascading effect and simplification of input tax credit (ITC). Simply put, ITC allows businesses to offset the tax paid on business purchases against the tax paid on sales, ensuring that tax is applied only to the value added at each stage of the supply chain, preventing cascading of taxes.
Access to ITC has always been conditional. The law prescribes requirements, such as possession of a valid invoice, receipt of goods/services, and compliance by the supplier, alongside specific exclusions where credit is restricted. This conditional framework has constantly led to a tussle between taxpayers and authorities.
