With effect from 29th March, 2019, the manner of utilization of Input Tax Credit (ITC) has been amended vide Notification No. 16/2019-CT, following which Rule 88A has been introduced. It states as under:
“Rule 88A: Order of utilization of input tax credit – Input tax credit on account of Integrated Tax shall first be utilised towards payment of Integrated Tax, and the amount remaining, if any, may be utilised towards the payment of Central Tax and State Tax or Union Territory Tax, as the case may be, in any order:
Provided that the input tax credit on account of Central Tax, State Tax or Union Territory Tax shall be utilised towards payment of Integrated tax, Central Tax, State Tax or Union Territory Tax, as the case may be, only after the input tax credit available on account of Integrated Tax has first been utilised fully.”
Here’s breaking down the change for you.
1. If you have IGST Input Credit, first exhaust that for payment of IGST Output
2. If there is any IGST ITC left thereafter, use it for payment of CGST and SGST Output, now in no particular order, i.e. you can use the remaining IGST ITC to pay both CGST and SGST equally. It will not follow the sequence of first setting it off against CGST Output and then the remaining against SGST Output.
3. Credit can be taken in any order.
4. ITC of CGST and SGST can be utilized towards payment of IGST, CGST, SGST only after exhausting the ITC of IGST.
5. It still remains that the ITC of CGST cannot be used to pay SGST, and ITC of SGST cannot be used to pay CGST.
To put it simply, the following tables show how the manner of utilizing GST ITC has changed in the past few months.
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Up to 31-Jan-2019
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Payment For
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First Set off From
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Then Set off From
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IGST
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IGST
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CGST and SGST
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CGST
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CGST
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IGST
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SGST
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SGST
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IGST
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From 01-Feb-2019 due to Section 49A of CGST
(Amendment) Act, 2018
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Payment For
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First Set off From
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Then Set off From
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IGST
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IGST
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CGST and SGST
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CGST
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IGST ITC left after setting off IGST
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CGST
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SGST
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IGST ITC left after setting off IGST and CGST
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SGST
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From 29-Mar-2019 due to Rule 88A – Order of
utilizing IGST ITC against CGST and SGST is done away with
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Payment For
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First Set off From
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Then Set off From
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SGST
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IGST ITC left after setting off IGST
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SGST
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CGST
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IGST ITC left after setting off IGST
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CGST
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IGST
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IGST
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CGST and SGST
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Illustration 1: ITC Utilization in Case of No
IGST Liability
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w.e.f. 29-Mar-19
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IGST
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CGST
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SGST
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ITC Available
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1000
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1000
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1000
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Output Tax Payable
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NIL
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2000
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2000
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IGST Utilized
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NIL
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500
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500
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CGST Utilized
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NIL
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1000
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N.A.
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SGST Utilized
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NIL
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N.A.
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1000
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|
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|
|
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ITC Balance
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NIL
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NIL
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NIL
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Payment in Cash
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NIL
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500
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500
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Illustration 2: ITC Utilization in Case of IGST
Liability
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w.e.f. 29-Mar-19
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IGST
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CGST
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SGST
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ITC Available
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1000
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1000
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1000
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Output Tax Payable
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500
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500
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500
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|
|
|
|
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IGST Utilized
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500
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250
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250
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CGST Utilized
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NIL
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250
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N.A.
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SGST Utilized
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NIL
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N.A.
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250
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|
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ITC Balance Carried Fwd
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NIL
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750
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750
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Payment in Cash
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NIL
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NIL
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NIL
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