Vide notification no. 02/2019-Central Tax dated 29th January, 2019, the Central Government announced that the Central Goods and Service Tax (Amendment) Act, 2018 shall come into force from 1st February, 2019.

With the said announcement, there are various rules / provisions affecting utilization of input tax credit which has been amended and the said amendments relating to the rules / provisions affecting utilization of input tax credit is being highlighted in the present article.

LIST OF TOTAL NUMBER OF AMENDMENTS –

In total, there are four amendments being undertaken, vide the Central Goods and Service Tax (Amendment) Act, 2018, which are made effective from 1st February, 2019. First of all, let us have a look into the list of the sections which are either being inserted or being amended –

Sr. No. Relevant section Type of amendment
1 Section 49 (5) (c) Proviso inserted
2 Section 49 (5) (d) Proviso inserted
3 Section 49A New section inserted
4 Section 49B New section inserted

UNDERSTANDING THE EFFECT OF AMENDMENT / INSERTION –

1. AMENDMENT TO SECTION 49 (5) (c) –

Following proviso has been inserted to section 49 (5) (c) –

‘Provided that input tax credit on account of the State tax shall be utilized towards the payment of the integrated tax only where the balance of the input tax credit on account of the central tax is not available for payment of integrated tax.’

The above proviso, in simple terms, means that before utilizing the balance of input tax credit of SGST for the payment of integrated tax, the input tax credit balance of CGST should be NIL i.e. input tax credit of CGST needs to be first fully used only then the balance of SGST can be used for payment of IGST.

2. AMENDMENT TO SECTION 49 (5) (d) –

Following proviso has been inserted to section 49 (5) (d) –

‘Provided that the input tax credit on account of the union territory tax shall be utilized towards the payment of integrated tax only where the balance of the input tax credit on account of central tax is not available for payment of integrated tax.’

Putting the above proviso, in simple terms, it means that before utilizing the balance of input tax credit of UTGST for the payment of integrated tax, the input tax credit balance of CGST should be NIL i.e. input tax credit of CGST needs to be first fully used only then the balance of UTGST can be used for payment of IGST.

3. NEWLY INTRODUCED SECTION 49A –

Entirely new section 49A has been introduced and the same is reproduced hereunder for ready reference –

‘Notwithstanding anything contained in section 49, the input tax credit on account of central tax, state tax or union territory tax shall be utilized towards the 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 utilized fully towards such payment.’

The gist of the above newly introduced section is that before utilizing the balance of input tax credit of CGST, SGST or UTGST, the balance of input tax credit of IGST should be NIL i.e. the balance of input tax credit of IGST should be used first towards payment of IGST, CGST, SGST or UTGST.

4. NEWLY INTRODUCED SECTION 49B –

Entirely new section 49B has been introduced and the same is reproduced hereunder for ready reference –

‘Notwithstanding anything contained in the Chapter and subject to the provisions of clause (e) and clause (f) of sub-section (5) of section 49, the Government may, on the recommendations of the council, prescribe the order and manner of utilization of the input tax credit on account of integrated tax, central tax, state tax or union territory tax, as the case may be, towards the payment of any such tax.’

Section 49B is self-explanatory and the same means that the Government can amend the order and manner of utilization of input tax credit.

PAYMENT SEQUENCE –

TAX PAYMENT OF INPUT TAX CREDIT UTILISATION SEQUENCE
FIRST SECOND THIRD
IGST IGST CGST SGST / UTGST
CGST IGST CGST
SGST IGST SGST
UTGST IGST UTGST

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13 Comments

  1. mahantesh angadi says:

    dear sir,

    one of my client providing services to construction company, he is providing fabrication related services, can he take input services on which he is procuring materials, plz suggest..

  2. rm says:

    thanks tax guru always for guidance of complex tax laws to aam janata with clarity.
    what is logic of gst law and why preference of input utilization of igst,cgst,sgst first to igst output?
    also what is rationale for significant importance to igst compared to sgst/cgst i.e. for example: when gst rate for an item is 18%, why igst@18% and why cgst,sgst billed at 9% each? what is need for inter state and intra state tax discrimination when the gst tag line is one nation one tax? it should both in words and deeds. the gst complexity invites number of litigation and gst audit and returns, annual returns gst web portal make tax professionals bald,high bp,head & heart aches by hyper tension for sticking to due date & too many changes too frequently ?

  3. Sachin Goel says:

    This is ridiculous. This will affect the trade adversely and badly. It is against the intention of GST, “One Nation One Tax”. Any one, who doesn’t have IGST output liability will be forced to pay SGST in cash while CGST balance will remain unutilised.

  4. PIYUSHBHAI POPAT says:

    ACCORDING TO ME ITC OF IGST FIRST ADJUST AGAINST CGST AND SGST. BUT ITC OF CGST AND SGST FIRST ADJUSTING AGAINST CGST AND SGST AND THEN IF EXCESS ANYTING AGAINST IGST. AND 49B SEQUENCE IS NOT SPECIFIED WE CAN CLAIM EQUAL IN CGST AND SGST OF IGST CREDIT

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