Taxpayers who are covered in GST Act. can avail input credit. Input tax refers to the mechanism whereby you can get tax deductions that you have paid on the inputs at the time when you are paying the tax on the output. Input tax credit or ITC enables businesses to reduce the tax liability as it makes a sale by claiming the credit depending on how much GST was paid on the business’s purchases.
For example, let us say you manufacture a product and the tax payable on output is Rs. 1500 while the tax paid on input is Rs. 1000. The input credit is Rs. 1000 and so you are only required to deposit Rs. 500 in taxes. This is because the final product is Rs. 1500 while your purchases are Rs. 1000.