Sanjay Aggarwal
sanjay-aggarwal

The Law allows utilization of credit of one component of tax against the other in different situations with the exception of utilization of CGST for SGST and vice versa, the Government has taken this bold step and so needs to do a lot of background accounting to keep the respective accounts of CGST/SGST/IGST straight  and compute the respective balances of these accounts after making the respective transfers of funds from one account to the other depending on the computation of taxes paid in a given account and utilization of these taxes as credit for making tax payment in the other account.

The order of utilisation of Input  Tax Credits shall be

1. The ITC on account of IGST is  allowed to be utilized towards payment of IGST, CGST and SGST.

2. The ITC on account of CGST is allowed  to be allowed for payment of CGST and thereafter for payment of IGST.

3. The ITC on account of SGST is allowed  to be allowed for payment of SGST and thereafter for payment of IGST.

Case Study: Under stand by way of an example.

Transaction of sale which is inter state and vice versa of Rs 100000/- . and Purchases of Rs 75000/-

Assuming the CGST & SGST rate 9% and  IGST rate 18%.

The calculation is as follows

Position 1 : Utilisation of Input tax credit of CGST  & SGST for payment of IGST
  Description Rate  Amount Remarks
A Invoice details
  IGST Sale           100,000.00
  IGST  rate 18%              18,000.00 Tax rate Assumed
                118,000.00  
B Purchase Details
  Total Purchases              75,000.00
  CGST 9%                 6,750.00 Input Tax Credit Avaible
  SGST 9%                 6,750.00 Input Tax Credit Avaible
                   88,500.00  
C Calculation of Input Tax Credit
  IGST Payable              18,000.00
  CGST                 6,750.00 CG will transfer the amount to IGST Account u/s 37 A (1) of MGL
  SGST                 6,750.00 SG will transfer the amount to IGST Account u/s 37 A (2) of MGL
  Total Payable                   4,500.00  

Position 2 : Utilisation of Input tax credit of IGST for payment of CGST & SGST
  Description Rate  Amount Remarks
A Invoice details
  Local sale    100,000.00
  CGST 9%        9,000.00 Tax rate Assumed
  SGST 9%        9,000.00 Tax rate Assumed
         118,000.00  
 
B Purchase Details
  Total Inter State Purchases      75,000.00
  IGST 18%      13,500.00 Tax rate Assumed
 
           88,500.00  
 
C Calculation of Input Tax Credit
  CGST Payable        9,000.00 CGST Component of GST Payable
  SGST Payable        9,000.00 SGST Component of GST Payable
  Total      18,000.00
ITC of IGST
Against CGST        9,000.00 CGST Payable  is available for ITC to full extent
Against SGST        4,500.00 SGST Payable  is available for ITC to full extent subject to balance available
  Total      13,500.00
  Net GST Payable          4,500.00  

Position of Different Accounts with Government
A IGST Account with the Government
Opening Balance                     – Opening Balance Shall always be zero
Add : Transfer
From CGST A/c for Payment of IGST        6,750.00 Refer position 1 , column B above
From SGST A/c for payment of IGST        6,750.00 Refer position  1 ,column B above
Less: Transfer
From  IGST A/c for payment of CGST        9,000.00 Refer position  3 , column C above
From  IGST A/c for payment of SGST        4,500.00 Refer position  3 , column C above
Closing Balance Closing Balance shall always be zero
B CGST Account with the Government
Opening Balance                     – Assumed
Add : Transfer
From  IGST A/c for payment of CGST        9,000.00 Refer position 3 , column C Above
Add: CGST Component of inter state
Supplies,/Import to unregistered person, ITC Not Applicable, Composition dealer etc  –
Less Transfer
From CGST Account for payment of IGST 6,750.00 Refer position 1 , column B Above
Closing Balance in account        2,250.00
C SGST Account with the Government
Opening Balance Assumed
Add : Transfer
From  IGST A/c for payment of CGST        4,500.00 Refer position 3 , column C Above
Add: SGST Component of inter state
Supplies,/Import to unregistered person, ITC Not Applicable and  Composition dealer etc
Less Transfer
From SGST Account for payment of IGST        6,750.00 Refer position 1 , column B Above
Closing Balance in account      (2,250.00)

Author can be reached at sanjayaggarwal2006@gmail.com

 Check Input Credit Scheme Under GST

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2 responses to “Illustrative Explanation for Cross Utilisation of CREDITS under GST”

  1. Sarjeet Rajani says:

    under which section cross utilization is allow.

    Pls. Advise

  2. Sarjeet Rajani says:

    under which section cross utiliztion is allow.

    pls, advise

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