# Illustrative Explanation for Cross Utilisation of CREDITS under GST

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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Tags : goods and services tax (5879) GST (5480)

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

1. Sarjeet Rajani says:

under which section cross utilization is allow.