Dr. Sanjiv Agarwal FCA, FCS

Dr. Sanjiv AgarwalSection 49 of the CGST Act, 2017 contains provisions in relation to payment of tax, interest, penalty and other amounts.

Section 49 (5) of CGST Act, 2017 provides manner of utilizing Input Tax Credit (ITC) for payment of GST output tax liability, e.g IGST can be set off against IGST and then CGST and SGST, CGST can be set off against CGST and then against IGST, and SGST can be set off against SGST and then against IGST.

Prior to 1.2.2019

The amount under various heads of credit could be used in the following order of preference:

(i) IGST can be used:

(a) For payment of tax as IGST

(b) For payment of tax as CGST

(c) For payment of tax as SGST

(ii) CGST can be used:

(a) For payment of tax as CGST

(b) For payment of tax as IGST, in case balance is available

(iii) SGST can be used:

(a) For payment of tax as SGST

(b) In case balance available, payment of tax as IGST

The following matrix depicts the manner of availing input tax credit prior to 1st February, 2019, i.e. upto 31.01.2019: 

Payment for First set off from Then set off from
SGST SGST IGST
CGST CGST IGST
IGST IGST CGST and SGST

W.e.f. to 1.2.2019

By CGST (Amendment) Act, 2018, section 49A was inserted w.e.f. 1.2.2019.

Accordingly, Government had changed the order of setoff of input tax credit by introducing section 49A w.e.f. 01.02.2019 according to which, IGST Credit was to be set off fully before taking any setoff of CGST or SGST, which meant that IGST Credit has to be first utilized fully for payment of IGST then for CGST and then for SGST liability as the case may be, even before utilization of ITC of CGST or SGST w.e.f. 1.2.2019.

The following matrix explains the manner of credit w.e.f. 01.02.2019 for any tax payments to be made:

Payment for First set off from Then set off from
SGST IGST SGST
CGST IGST CGST
IGST IGST CGST and SGST

W.e.f. 29.03.2019

It is understood that various quarters had represented before all necessary forums to remove the hardship of taxpayer due to the amended provisions. Now, Ministry of Finance has come out with a possible solution by inserting new Rule 88A in CGST Rules w.e.f. 29.03.2019 to remove the hardship caused to taxpayers by earlier amendment w.e.f. 1.2.2019.

Vide Notification No. 16/2019-CT dated 29.03.2019, following Rule 88A has been inserted which is effective from 29.03.2019 itself. It provides as follows:

“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.”

Taxpayers may, therefore, note the following to be implemented w.e.f. 29.03.2019 which seeks to nullify the impact of change and even the provision before 1.2.2019.

a) ITC on IGST has to be first fully utilized towards IGST and balance towards CGST / SGST / UTGST.

b) For utilization of balance IGST credit towards CGST / SGST / UTGST, there is no order of set off as earlier prescribed.

c) Credit can be taken in any order as per convenience / requirement.

d) Set off ITC of CGST / SGST / UTGST can be utilized towards IGST, CGST, SGST or UTGST but only after fully exhausting the ITC of IGST.

Following tables illustrate the new manner of utilizing input tax credit:

Utilization of ITC w.e.f. 29.03.2019 (with no IGST outward liability)

  IGST CGST SGST / UTGST
Input tax available 100 100 100
Output tax payable 200 200
Under new rule 88A
IGST utilized 50 50
CGST utilized 100
SGST utilized 100
ITC Balance
Cash payment 50 50

 Utilization of ITC w.e.f. 29.03.2019  (with IGST outward liability) 

  IGST CGST SGST / UTGST
Input tax available 100 100 100
Output tax payable 50 50 50
Under new rule 88A
IGST utilized 50 25 25
CGST utilized 25
SGST utilized 25
ITC Balance c/f 75 75

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17 Comments

    1. K. Chenchurama sarma says:

      Sir, I request you throw light on the following issue.
      IN-PUT – IGST CGST SGST
      NIL 50 500
      OUT-PUT 200 NIL NIL
      Can we claimg entire input from SGST for payment of IGST. and if so, whether the portal allows.
      Thanks
      Rama Sarma
      9963144399
      HYDERABAD.

  1. VSSRajan says:

    I am unable to utilize the Cash ledger balance form GCST to IGST tax only , in GST Portal while filing GSTR 3B !! Any help available ??

    Thanks in advance

  2. L ANANTHA says:

    We are making sgst and cgst input purchases and and making igst sales and local sales also. so far my cgst excess credit adjusted against igst but huge sgst credit is not utilised now we are making local sales and cgst credit cleared and sgst not still pending. it asking for payment balance cgst please clarify how can I sgst excess credit lying in my account

  3. S.S.Vijayakumar says:

    The balances given are correct. Total ITC is Rs.300. Total OTC is Rs.150. Balance ITC is Rs.150/- which is carried over as Rs.75 each in CGST and SGST

  4. Sanjay Balande says:

    Ref :  Utilization of ITC w.e.f. 29.03.2019  (with IGST outward liability.
    Sir,
    Please refer to the illustration given above. Here the balance shown as Rs. 25/-CGST and Rs. 25 under SGST. I think the alance should be Rs. 75/- at each place. Your articles are good and usually, I read it.
    Thanks & Regards,
    ssbalande

  5. D V V SATYANARAYANA says:

    I think there is a mistake in this table which is given in this post

    Utilization of ITC w.e.f. 29.03.2019 (with IGST outward liability)
    IGST CGST SGST / UTGST
    Input tax available 100 100 100
    Output tax payable 50 50 50
    Under new rule 88A
    IGST utilized 50 25 25
    CGST utilized – 25 –
    SGST utilized – 25
    ITC Balance c/f – 25 25

  6. VINAYA A S says:

    Hi Sir,

    Good Article. Thank You. In the table on Utilization of ITC w.e.f. 29.03.2019 (with IGST outward liability), ITC C/fd seems to be Rs 75 (100-25) for both CGST & SGST. Please check once.

    1. shivam says:

      I have a question, If i have a CGST input of Rs 50 & a Output Liability of Rs 100 in IGST & Rs 100 in CGST. So input of Rs 100 in CGST will be utilized against CGST or IGST ?

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