As per Notification No. 16/2019-Central Tax, dated 29th March, 2019 – Central Government inserted Rule 88A explaining order of utilization of input tax.
“Rule 88A. Order of utilization of input tax credit.- Input tax credit on account of integrated tax shall first be utilised towards payment of integrated tax, and the amount remaining, if any, may be utilised towards the payment of central tax and State tax or Union territory tax, as the case may be, in any order:
Provided that 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.”
Explanation of “Rule 88A”:
- FIRST FULL UTILIZATION OF IGST ITC– input tax credit on account of integrated tax shall first be utilised towards payment of integrated tax, and the amount remaining for central tax and State tax or Union territory tax if any.
- NO ORDER SET FOR IGST ITC UTILIZATION BETWEEN CGST & SGST– the amount of IGST ITC remaining after utilization towards payment of IGST may be utilised towards the payment of central tax and State tax or Union territory tax, as the case may be, in any order.
- ITC UTILIZATION OF CGST & SGST– 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.
Example 1:
|
IGST |
CGST |
SGST |
|
| OUTPUT TAX PAYABLE |
25000 |
50000 |
50000 |
| INPUT TAX CREDIT |
30000 |
12000 |
12000 |
Solution:
|
IGST |
CGST |
SGST |
|
| OUTPUT TAX PAYABLE |
25000 |
50000 |
50000 |
| Less: IGST ITC |
25000 |
2500 |
2500 |
| Less: CGST ITC |
– |
12000 |
– |
| Less: SGST ITC |
– |
– |
12000 |
| CASH PAYMENT |
– |
35500 |
35500 |
In the given example ITC of IGST Rs. 30,000 has been first utilised for IGST liability of Rs. 25,000 and balance of Rs. 5,000 utilised for the liability of CGST & SGST in equal proportion as per our convenience.
Alternatively Balance of Rs. 5,000 can be utilise fully for CGST also, as shown below
|
IGST |
CGST |
SGST |
|
| OUTPUT TAX PAYABLE |
25000 |
50000 |
50000 |
| Less: IGST ITC |
25000 |
5000 |
– |
| Less: CGST ITC |
– |
12000 |
– |
| Less: SGST ITC |
– |
– | 12000 |
|
CASH PAYMENT |
– |
33000 |
38000 |
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