To the extent that the purchaser of a taxable supply uses that good or service in the production of other taxable supplies, it is entitled to an “input tax credit” and can recover the tax it has paid from the government.
The MUSH sector is entitled to claim input tax credits to the extent that its purchases are used in making taxable supplies, and it is eligible for a special rebate of a portion of the tax paid on other purchases.
Exempt supplies and zero-rated supplies do not attract any tax from the ultimate consumer. However, in respect of exempt supplies, the vendor, while paying the GST on purchases, is not entitled to an input tax credit. In consequence, in the case of exempt supplies GST is paid to the federal government at the penultimate stage in the production chain rather than by the ultimate consumer.
In principle, zero-rated supplies attract the GST in the same way as any other taxable supply as they move through the production chain to the ultimate consumer. However, the consumer pays a tax set at “0 %”, and suppliers are entitled to the input tax credit, so that no net revenue is raised for the federal government at any stage in the production chain by the production and sale of these goods.
The court noted that the object of the GST Act was the imposition of a value-added tax on consumers of taxable supplies and suppliers of exempt supplies, and found that the government achieved this object by requiring a supplier to pay the tax at the time of purchase and then allowing recovery, through the input tax scheme, of that portion of the payment that is attributable to the production and sale of other taxable supplies.
by Anandaday Mishra, Founder Advocate , AMLEGALS
( The author is one of the leading litigation and advisory advocate. He has published various research papers on GST . He handles cases in Tribunals & High Courts of India. He can be contacted on firstname.lastname@example.org .For more, please refer www.amlegals.com )
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