GST SET OFF RULES WEF 01.02.2019.

As per CGST Amendment Act 2018, the set off rules has been changed the updated rules are presented with examples as follows:

Section 49(2), 5(c), 5(d)

Amended proviso 5(c)

“Provided that the input tax credit on account of State tax shall be utilised towards 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;”;

Amended proviso 5(d)

In clause (d), the following proviso shall be inserted, namely:–– “Provided that the Input tax credit on account of Union territory tax shall be utilised towards 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;

Let us understand with example:

IGST Liability: 15000.

CGST Input: 10,000.

SGST Input: 10,000.

Answer:

Old Rule: New Rule:
SGST: 10,000.

CGST: 5,000. 

CGST Input: 10,000.

SGST Input: 5,000.

 New Provision Section 49A

“49A. Notwithstanding anything contained in section 49, 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 towards such payment.

Implication of such provision:

The implication of such provision is that, we have to first utilize input tax credit of IGST, and then use CGST/SGST input tax credit for the balance liability.

Let us Understand with following Chart:

As per old law: The Following sequences are required to be maintained:

 

IGST LIABILITY

 

CGST LIABILITY

 

SGST LIABILITY

• First IGST CREDIT.

•Second Either of CGST OR SGST CREDIT. 

• First CGST CREDIT.

• Second IGST CREDIT. 

• First SGST CREDIT.

• Second IGST CREDIT. 

 As per New Amended CGST Law: The Following sequences are required to be maintained:

 

IGST LIABILITY

 

CGST LIABILITY

 

SGST LIABILITY

• First IGST CREDIT

• Second CGST CREDIT

• Third SGST CREDIT

•First IGST CREDIT

•Second CGST CREDIT

•First IGST CREDIT

•Second SGST CREDIT

After the insertion of new provision of section 49A it seems that the registered person needs to pay GST in certain situation which was not the case earlier

Let us understand with examples:

EXAMPLE 1:

Old Scenario(Before Amendment of CGST Law):
Credit Amount Liability Adjustment Ist

 

Adjustment IInd Balance To Be Paid in Cash
IGST 20 0 0 0 0
CGST 20 30

 

Rs 30-20 (CGST C) Rs 10-10 (IGST C) 0
SGST 20 20 Rs 30-20 (SGST C) Rs 10-10 (IGST C) 0
New Scenario (After Amendment of CGST Law):
Credit Amount Liability

 

Adjustment Ist Adjustment IInd Balance To Be Paid in Cash
IGST 20 0 0 0 0
CGST 20 30 Rs 30-20 (IGST C) Rs 10-10 (CGST C) 0
SGST 20 30 Rs 30-20 (SGST C)   10

EXAMPLE 2:

Say Supplier for January 2019 has following Data for Filling GSTR-3B.

Output Tax Liabilty:

IGST Payable- Rs.200

CGST Payable -Rs.200

SGST Payable -Rs-200

Total Payable  -Rs-600

ITC Available:

IGST ITC- Rs.300

CGST ITC -Rs.200

SGST ITC -Rs-100

Total ITC Available -Rs-600

Before 01.02.2019 set off was as under:

IGST Liability of Rs.200 Set off from IGST ITC.

CGST Liability of Rs.200 Set off from CGST ITC.

SGST Liability of Rs.200 Set off from remaining IGST ITC of Rs.100 and  SGST ITC of Rs.100.

No Tax Is to be Payable & No ITC Carried Forward.

After 01.02.2019 (Section 49 A) set off was as under:

IGST Liability of Rs.200 set off from IGST ITC.

CGST Liability of Rs.200 set off from remaining IGST ITC of Rs.100 and CGST ITC of Rs.100. CGST ITC Carried Forward of Rs.100.

SGST Liability of Rs.200 set off from SGST ITC of Rs.100 and Rest SGST Liability of Rs.100 will be paid in Cash.

 Note: IGST credit 1st used against IGST, and also IGST 1st need to be set off against CGST and then only CGST credit can be set off against CGST, by amending the section 49A Supplier need to pay Tax of Rs.100 from his pocket.

Author Bio

Qualification: CA in Practice
Company: Manu Tayal And Company
Location: Bareilly, Uttar Pradesh, IN
Member Since: 07 Jul 2017 | Total Posts: 5

My Published Posts

More Under Goods and Services Tax

One Comment

  1. Hemanth says:

    Respected Sir,
    with the new amendment, we have cgst credit of 1.5 lacs, accumulating every month and at the same time we are paying cash for sgst liability. being a wholesaler in small scale industry working capital is very important for us.

    kindly guide us how to get out from this .

Leave a Comment

Your email address will not be published. Required fields are marked *

Search Posts by Date

October 2020
M T W T F S S
 1234
567891011
12131415161718
19202122232425
262728293031