<p style="text-align:justify"><span style="font-size:14px"><span style="background-color:white"><u><span style="color:black">Input credit</span></u><span style="color:black">&nbsp;means at the time of paying tax on output, you can reduce the tax you have</span><span style="color:#1e314f"> already paid on inputs and pay the balance amount.</span></span></span></p>

<p style="text-align:justify">&nbsp;</p>

<p style="text-align:justify"><span style="font-size:14px"><span style="background-color:white"><span style="color:#1e314f">Here&rsquo;s how-</span></span></span></p>

<p style="text-align:justify">&nbsp;</p>

<p style="text-align:justify"><span style="font-size:14px"><span style="background-color:white"><span style="color:#1e314f">When you buy a product/service from a registered dealer you pay taxes on the purchase. On selling, you collect the tax. You adjust the taxes paid at the time of purchase with the amount of output tax (tax on sales) and balance liability of tax (tax on sales&nbsp;<em>minus</em>&nbsp;tax on purchase) has to be paid to the government. This mechanism is called utilization of input tax credit.</span></span></span></p>

<p style="text-align:justify">&nbsp;</p>

<p style="text-align:justify"><span style="font-size:14px"><span style="background-color:white"><span style="color:#1e314f">For example-</span></span></span></p>

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<p style="text-align:justify"><span style="font-size:14px"><span style="background-color:white"><span style="color:#1e314f">Mr A is a manufacturer:</span></span></span></p>

<ul>
	<li style="text-align:justify"><span style="font-size:14px"><span style="background-color:white"><span style="color:#1e314f">Tax payable on output (FINAL PRODUCT) is Rs 450</span></span></span></li>
	<li style="text-align:justify"><span style="font-size:14px"><span style="background-color:white"><span style="color:#1e314f">Tax paid on input (PURCHASES) is Rs 300</span></span></span></li>
	<li style="text-align:justify"><span style="font-size:14px"><span style="background-color:white"><span style="color:#1e314f">You can claim INPUT CREDIT of Rs 300 and&nbsp;</span></span></span><span style="font-size:14px"><span style="background-color:white"><span style="color:#1e314f">you only need to deposit Rs 150 in taxes.</span></span></span></li>
</ul>