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Input tax credit is the credit manufacturer's received for paying input taxes towards inputs used in the manufacture of products. With the help of input tax credit, he can offset the output tax against the input tax already paid. Input tax credit is not applicable on all types of inputs. Each state has its own norms and conditions in this regard and are applicable accordingly.Input Tax Credit under VAT:The value added tax (VAT) is charged on the value addition to goods, with the VAT liability being calculated on by reducing the input tax credit from the output sales tax during the payment duration. This can be explained with an input tax credit example:Input purchased in the period: Rs.1 lakhTotal sales in the month: Rs.2 lakhsInput tax paid: Rs.4,000Output tax payable: Rs.25,000Overall VAT to be paid: (output tax paid – input tax paid) = (Rs.25,000 – Rs.4,000) = Rs.21,000Therefore, the overall tax payable can be directly calculated as the difference between the overall tax liability and the input tax credit.Input Tax Credit on Service Tax/Excise:This is called as CENVAT credit, wherein the service taxes paid by a different service provider can be claimed as tax credit. To explain this simply, every service provider is in fact a service consumer himself. A typical service provider will have at least one telephone in his office, for which he is paying service taxes on bills. Now, this tax paid becomes a part of the overall input cost for the service provider, which will then increase the prices of the service they are offering. This will give rise to a cascading effect which will ultimately hit the final consumer with higher prices. To avoid such a scenario, the CENVAT credit is offered by the government to service provider, which is a type of input tax credit, broadly speaking.

One of the most typical (and legal) reasons is that the job in question cannot be modified to accommodate a deaf person without an undue financial burden being placed on the company. If a deaf person applies for a job that can have a minor accommodation by either (a) removing a non critical function or (b) providing a tool or piece of equipment that allows them to perform the full job function (which, depending on state, can be written off or declared for a tax credit), then that is in line with both standard practice and the ADA.So if a deaf person applied for a cashier at Kohl’s, they would be turned down. There is just no reasonable accommodation here: being able to hear customers, answer the phone and use a handheld radio are core functions of the job. If a deaf person applied for a truck unloader job, they could be qualified for it. The reasonable accommodation is: minor team training so they know how to be effective partners, possibly regular visits from a state assigned assistant to help with any needs or concerns.

I wouldn’t call it a failure, yet.But we are on the brink of collapse and our actions now will define which direction we want to take. There are only two ways from here - either increase the complexity, or approach towards simplicity. But, from what I’ve seen on the basis of recent decisions, I don’t think simplicity is where we’re headed. Things are becoming unnecessarily complex.Some pointers:GST was based on a concept of seamless transfer of input tax credit. In fact, that was the whole reason why GST was implemented and it was the biggest plus point compared to the previous regime. However, the government is introducing various complexities by way of disallowing input tax credit. Such as this:While sanctioning refunds of accumulated input tax credit due to inverted tax structure, the ITC of services is blocked. Similarly, even for sanctioning refund on account of exports, the input credit of capital goods is blocked.Many persons are given a “special tax rate” which appears to be lower, but on a condition that ITC is not allowed. Recently, the rates of buildings under construction were dropped, but ITC was blocked. I’ve explained previously why this system causes inefficiency. It’s an open route to black markets.Recently, they’ve introduced a new system of utilisation of input tax credit, which is designed in a way that people who have input credit might still have to pay in cash. This is the death knell for the much touted “seamless credit flow” as the major advantage of GST. Read Section 49A.A very big problem - for which the government is not entirely responsible - is the problem of fake invoices. In fact, in my estimate this problem is much bigger than we currently realise. Only recently, GST department has unearthed tax evasion of crores on the basis of fake invoices. GST Intelligence unit busts Rs 100-crore fake invoice racket in Gujarat. This problem is set to create havoc in the market. Even under the previous regime, there was always a problem of fake or proxy firms appearing who only served as temporary credit passing on devices. GST department has now started to scratch the surface of what might be a huge mountain.When the GST was introduced, various states were arguing against it. They wanted to secure their funds. Therefore, a system of compensation was introduced whereby the Central Government guaranteed all the States that in case there is any revenue shortfall, they would be compensated for it. In fact, the assured guarantee included growth in revenues by 14% for five years. As a result of this, the State Governments are completely relaxed. They can just sit and do nothing, and they’d still get the money. However, the Central Government is under a lot of pressure.Combine the above with the fact that some taxpayers are in the jurisdiction of the State Governments while some are under the Central Government - and it’s like a lottery system. So people who are governed by the Central Government officers face a lot of questioning by the Central Government, whereas those under the State jurisdiction are enjoying. So, it’s possible that two people in the same industry are being treated unfairly merely on the basis of which department they’re with. That’s the definition of bias, and it’s happening. People governed by Central Government are facing the brunt of all the pressure, whereas others are having fun.When a new law is introduced, confusion ensues. That much is expected. However, what’s not expected is the government taking no steps to reign in the confusion, but rather exacerbating it. For example, every state has a different Authority for Advanced Ruling. Each of these are giving different decisions on a same topic. People giving these rulings aren’t exactly “senior” officers, and they can easily to “convinced” to side either ways.As others will agree, a very big point against GST was the absolutely and completely shitty electronic portal that was launched to support it. It’s now almost two years since the implementation of GST, and we’re still struggling with the GST portal. It has become beyond frustrating. Due to malfunctioning of the portal, people are not getting refunds, have had to pay higher taxes than required, and have had to pay heavy interest and penalties. I am not kidding. GST portal is responsible - in large part - for more than 4000 crores collected as “late fee” since the implementation of GST.[1]The composition scheme is absolutely shitty, and is probably the largest scam pulled off by any government. If you’re in composition scheme, I suggest you reevaluate your decision, because you’ve probably not even understood the plethora of conditions applicable for it, failure to comply with which renders one liable to hefty interest and possible penalties. Even the new scheme of composition scheme for services is quite useless. It’s almost like the government wanted to show that they’re doing good things for the public, but then actually making these things so difficult that nobody is going to exercise the ‘privilege’.In spite of all the above, I still didn’t call it a failure. This is why I think that GST Council has an important role to play in deciding which direction this law takes from now on. It could either set a new precedent of Indian tax laws moving towards efficiency and simplicity, or it could end up being the new income tax - a subject so complex that even experts struggle to wrap their heads around it. And my experience with what happened to income tax tells me that in the end, nobody benefits with this inefficiency - not the taxpayer, not the government, not the economy - only lawyers and CAs.Footnotes[1] GST returns: Govt collects Rs 4,172 crore as late fee since launch of the tax regime