Dr. Sanjiv Agarwal, FCA, FCS

 Dr. Sanjiv Agarwal

The Government has issue a clarification on manner of utilizing input tax credit w.e.f. 29.03.2019 [As clarified by CBIC Circular No. 98/17/2019-GST dated 23.04.2019] because GSTN does not have updation for the new manner of taking credit.

Section 49 of the CGST Act, 2017 contains provisions in relation to payment of tax, interest, penalty and other amounts.  Further, section 49 (5) of CGST Act, 2017 provides manner of utilizing Input Tax Credit (ITC) for payment of GST output tax liability, e.g IGST can be set off against IGST and then CGST and SGST, CGST can be set off against CGST and then against IGST, and SGST can be set off against SGST and then against IGST.

W.e.f. 29.03.2019

Vide Notification No. 16/2019-CT dated 29.03.2019, following Rule 88A has been inserted which is effective from 29.03.2019 itself. It provides as follows:

“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.”

Accordingly, the following was to be implemented w.e.f. 29.03.2019 which seeks to nullify the earlier manner prior to 01.02.2019 and 29.03.2019:

a) ITC on IGST has to be first fully utilized towards IGST and balance towards CGST / SGST / UTGST in any order and in any proportion.

b) For utilization of balance IGST credit towards CGST / SGST / UTGST, there is no order of set off as earlier prescribed.

c) Credit can be taken in any order as per convenience / requirement.

d) Set off ITC of CGST / SGST / UTGST can be utilized towards IGST, CGST, SGST or UTGST but only after fully exhausting the ITC of IGST.

The purpose of Circular No. 98 dated 23.04.2019 is to clarify the application of new Rule 88A and its uniform implementation:

The Circular clarifies and illustrates the manner (order) of utilization of ITC of IGST / CGST/SGST or UTGST by way of example.

Following tables illustrate the new provision as clarified vide Circular No. 98/17/2019-GST dated 23.04.2019:

1) Utilization of ITC w.e.f. 29.03.2019 (Option 1)

  IGST CGST SGST / UTGST
Input tax available 1300 200 200
Output tax payable 1000 300 300
Under new rule 88A
IGST utilized 1000 200 100
CGST utilized 100
SGST utilized 200
ITC Balance 100
Cash payment

2) Utilization of ITC w.e.f. 29.03.2019  (Option 2) 

  IGST CGST SGST / UTGST
Input tax available 1300 200 200
Output tax payable 1000 300 300
Under new rule 88A
IGST utilized 1000 100 200
CGST utilized 200
SGST utilized 100
ITC Balance c/f 100

It is important to note the following points for smooth implementation:

1) Presently, the common portal supports the order of utilization of input tax credit in accordance with the provisions before implementation of the provisions of the CGST (Amendment) Act i.e. pre-insertion of Section 49A and Section 49B of the CGST Act (01.02.2019).

2) Till the new order of utilization as per newly inserted Rule 88A of the CGST Rules is implemented on the common portal, taxpayers may continue to utilize their input tax credit as per the functionality available on the common portal.

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