Jyoti Jain
The Article on GST- Input Tax Credit and Utilization highlights:
(a) Definitions of Input tax credit, Input tax, Input, Input services and Capital Goods.
(b) Eligible Input tax credit and illustrative list of expenses
(c) Taxes paid on supply of goods or services which are not eligible for input tax credit
(d) Conditions to be fulfilled for availing ITC
(e) Time frame for availing ITC
(f) Manner of utilization of IGST, CGST, SGST/UTGST seperately in view of section 49 and newly inserted sections 49A and 49B of CGST Act, 2017 and rule 88A of CGST Rules, 2017 along with illustrations.
Note that as per Circular No. 98/17/2019-GST dated 23rd April 2019, the common portal currently 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 i.e. period prior to 1-2-2019. Therefore, 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.
Page Contents
- ITC Under GST – Relevant Definitions
- Eligible ITC Under GST
- Illustrative Expenses- Eligible For ITC
- Blocked ITC Under Gst-Section 17(5) of CGST Act, 2017
- Time Limit & Conditions For ITC Availment
- GST Payable On Outward “Supply”
- IGST Credit – Utilization
- CGST Credit- Utilization
- ITC UTILIZATION (ILLUSTRATIONS)
ITC Under GST – Relevant Definitions
> Input Tax Credit [Section 2(63) of CGST Act, 2017] – Credit of Input tax In simple terms, GST amount paid on inward supply which can be used at the time of paying tax on outward supply
> Input tax [Section 2(62) of CGST Act, 2017] – CGST, SGST, UTGST and IGST paid on any goods or services
> Input [Section 2(59) of CGST Act, 2017]–any goods other than capital goods used or intended to be used by a supplier in the course or furtherance of business
> Input service [Section 2(60) of CGST Act, 2017] – any service used or intended to be used by a supplier in the course or furtherance of business
> Capital goods [Section 2(19) of CGST Act, 2017] – Goods the value of which is capitalized in the books of accounts of the person claiming the input tax credit and which are used or intended to be used in the course or furtherance of business
Eligible ITC Under GST
- CGST or SGST or IGST or UGST charged on any supply of goods and services and includes:
- IGST paid on import of goods
- CGST or SGST or IGST or UGST paid under reverse charge on goods and services
Illustrative Expenses- Eligible For ITC
> Business Promotion other than covered in list of blocked ITC e.g. food expense or free samples
> Newspaper/Magazine, etc
> Training expenses
> Conveyance expenses (Radio Taxi like Ola, Uber)
> Legal & Professional fees
> Recruitment expenses
> Rent for business premises
> Security charges
> Packing charges
> Research and development expenses
> Telephone /Mobile expenses
> Internet charges
Blocked ITC Under Gst-Section 17(5) of CGST Act, 2017
> Motor vehicles and conveyances (eligible only in specific cases)
> Food and beverages, outdoor catering Beauty treatment, health services, cosmetic and plastic surgery except when they are used for further supply of same category of goods and services
> Membership of club, health and fitness centre
> Rent a cab, life insurance, health insurance (Eligible if obligatory for an employer under any law for the time being in force or when they are used for further supply of same category of goods and services Travel benefits extended to employees on vacation such as leave or home travel concession
> Goods or services received by non resident taxable person except imported goods
> Works contract services for construction of immovable property other than plant and machinery except when used for further supply of same service
> Goods / services used for construction of immovable property other than plant & machinery
> Goods or services on which taxes are paid under composition scheme
> Goods or services used for personal consumption
> Goods lost, stolen, destroyed, written off or disposed by way of gift or free samples
Time Limit & Conditions For ITC Availment
> Credit to be availed before the due date of filing return for September following the end of financial year or filing of annual return, whichever is earlier [Section 16(4)]
> Conditions for availing Input Tax credit –Section 16(2) of CGST Act, 2017
– Possession of tax invoice / Debit note issued by a registered supplier
– Receipt of goods / services
– Tax is paid by the supplier either in cash or through ITC
– Return is filed by the recipient of goods / services
– Amount towards supply of goods and services and tax thereon to be paid to supplier within 180 days from the date of invoice
GST Payable On Outward “Supply”
> CGST – Intra -State supply of goods or services
> SGST – Intra -State supply of goods or services or
> UTGST – Intra -Union Territory supply of goods
> IGST – Inter -State supply of goods / services or Import of goods or services
IGST Credit – Utilization
| Prior to 1-2-2019 [Section 49 of CGST Act, 2017] | From 1-2-2019 to 31-3-2019 [Sections 49, 49A and 49B of CGST Act, 2017] | 1-4-2019 Onwards [Sections 49, 49A and 49B of CGST Act, 2017 and rule 88A of CGST Rules, 2017] |
IGST credit to be utilized in the following order:-
|
IGST credit to be utilized in the following order:-
Note : IGST credit needed to be utilized completely before ITC of CGST / SGST or UTGST can be utilized for discharge of any tax liability. |
IGST credit to be utilized in the following order:-
Note : IGST credit needs to be utilized completely before ITC of CGST/ SGST or UTGST can be utilized for discharge of any tax liability. |
CGST Credit- Utilization
| Prior to 1-2-2019 [Section 49 of CGST Act, 2017]
> CGST credit to be utilized in the following order:- •First utilize towards payment of CGST •Second utilize towards payment of IGST •Not allowed against SGST or UTGST |
From 1-2-2019 to 31-3-2019 [Sections 49, 49A and 49B of CGST Act, 2017]
> CGST credit to be utilized in the following manner:- •First utilize IGST, if available towards payment of CGST and SGST or UTGST •Then, utilize CGST towards payment of CGST •CGST liability balance, if any to be paid in cash or •Utilize balance CGST input credit, if any towards payment of IGST •Not allowed against SGST or UTGST |
1-4-2019 Onwards[Sections 49, 49A and 49B of CGST Act, 2017 and rule 88A of CGST Rules, 2017]
> CGST credit to be utilized in the following order:- •First utilize IGST, if available towards payment of CGST/ SGST or UTGST •Utilize CGST towards payment of CGST •CGST liability balance, if any to be paid in cash or •Utilize balance CGST input credit, if any towards payment of IGST •Not allowed against SGST or UTGST |
SGST or UTGST CREDIT – UTILIZATION
| Prior to 1-2-2019[Section 49 of CGST Act, 2017] | From 1-2-2019 to 31-3- 2019[Sections 49, 49A and 49B of CGST Act, 2017] | 1-4-2019 Onwards [Sections 49, 49A and 49B of CGST Act, 2017 and rule 88A of CGST Rules, 2017] |
| > SGST or UTGST to be utilized in the following order:-
• First utilize towards payment of SGST or UTGST •Second utilize towards payment of IGST •Not allowed against CGST |
> SGST or UTGST to be utilized in the following manner:-
• First utilize IGST, if available after being used in IGST & CGST liability towards payment of SGST or UTGST •Then, utilize SGST or UTGST towards payment of SGST or UTGST •SGST or UTGST liability balance, if any to be paid in cash or •Utilize balance SGST or UTGST input credit, if any towards payment of IGST •Not allowed against CGST |
> SGST or UTGST to be utilized in the following order:-
•First utilize IGST, if available towards payment of SGST or UTGST/CGST liability •Then, utilize SGST or UTGST towards payment of SGST or UTGST •SGST or UTGST liability balance, if any to be paid in Cash Or •Utilize balance SGST or UTGST input credit, if any towards payment of IGST •Not allowed against CGST |
ITC UTILIZATION (ILLUSTRATIONS)
|
Scenario 1. Position Prior to 1-2-2019 |
|||
| Particulars | IGST | CGST | SGST |
| Output liability |
2000 |
2000 |
2000 |
| Input liability |
3000 |
1250 |
1250 |
| Payment (ITC) | (2000) IGST- Intra Head |
(1250) CGST- Intra Head (750) IGST- Inter-Head (1st priority) |
1250 SGST- Intra Head (250) IGST- Inter-Head (2nd Priority) |
| Payment (cash) | NIL | NIL | 500 |
| ITC Balance | NIL | NIL | NIL |
ITC UTILIZATION (ILLUSTRATIONS)
| Scenario 2. From 1-2-2019 to 31-3-2019 | |||
| Particulars | IGST | CGST | SGST |
| Output liability |
2000 |
2000 |
2000 |
| Input liability |
3000 |
1250 |
1250 |
| Payment (ITC) | (2000) IGST-1st priority |
(1000) IGST-1st priority (250) CGST-2nd priority |
1250 SGST-1ST Priority CGST credit cannot be utilized against SGST |
| Payment (cash) | NIL | NIL | 750 |
| ITC Balance | NIL | 1000 | NIL |
ITC UTILIZATION (ILLUSTRATIONS)
| Scenario 3. Position 1-4-2019 Onwards (Option 1) | |||
| Particulars | IGST | CGST | SGST |
| Output liability | 2000 | 2000 | 2000 |
| Input liability | 3000 | 1250 | 1250 |
| Payment (ITC) | (2000) IGST-1st priority |
(750) IGST-1st priority (1250) CGST-2nd priority |
(250) IGST-1ST Priority (1250) SGST-2nd Priority |
| Payment (cash) | NIL | NIL | 500 |
| ITC Balance | NIL | NIl | NIL |
ITC UTILIZATION (ILLUSTRATIONS)
| Scenario 3. Position 1-4-2019 Onwards (Option 2) | |||
| Particulars | IGST | CGST | SGST |
| Output liability | 2000 | 2000 | 2000 |
| Input liability | 3000 | 1250 | 1250 |
| Payment (ITC) | (2000) IGST-1st priority |
(250) IGST-1st priority (1250) CGST-2nd priority |
(750) IGST-1ST Priority (1250) SGST-2nd Priority |
| Payment (cash) | NIL | 500 | NIL |
| ITC Balance | NIL | NIl | NIL |
(The author can be reached at jyotijain101@gmail.com)
@self correction :
ITC Utilisation (Illustration): In scenario 2:
1. Payment (ITC) row : CGST Column:
Read as : (1000)
IGST-1st priority
(1000)
CGST-2nd priority
2. ITC Balance row : CGST Column
250