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 |
|
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| A | IGST Account with the Government |
|
|
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| 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
under which section cross utilization is allow.
Pls. Advise
under which section cross utiliztion is allow.
pls, advise