New order of utilization of input tax credit (ITC) with automated set-off template in excel

Section 49A and Section 49B were introduced in the GST Law vide CGST Amendment Act 2018, to be effective from 1st February 2019, specifying the provision related to the new order of utilization of input tax credit under GST.

While the new set-off enabling provision is apparently effective from 1st February 2019, the manner of set-off was notified under new Rule 88A of CGST Rules 2017, vide notification no. 16/2019-CT dated 29.03.2019. Post implementation of Sec. 49A, challenges are being faced by the trade and industry in application of the new set-off order.

Central Board of Indirect Taxes and Customs (CBIC) had recently issued Circular No. 98/17/2019-GST dated 23.04.2019, in order to provide clarification in respect of the order of utilization of input tax credit under GST. Below mentioned are the key highlights of the Circular:

  • The newly inserted Rule 88A of the CGST Rules 2017 allows utilization of input tax credit in the below manner:

1. Input tax credit on account of Integrated Tax (IGST) shall first be utilized against the output tax liability of Integrated Tax (IGST);

2. Balance amount of input tax credit on account of Integrated Tax (IGST) (if any) shall then be utilized against the output tax liability of Central Tax (CGST) or State / UT Tax (SGST / UTGST) in any order and in any proportion;

3. Upon completion of the first two set-off process as mentioned above, input tax credit on account of Central Tax (CGST) and State / UT Tax (SGST/ UTGST) shall be utilized against the output tax liability of Central Tax (CGST) and State /UT Tax (SGST/ UTGST) respectively.

4. Balance amount of input tax credit on account of Central Tax (CGST) and State Tax (SGST/ UTGST) (if any) shall be utilized against output tax liability of Integrated Tax (IGST) (if any).

Note: Input tax credit on account of Central Tax (CGST) and State /UT Tax (SGST/ UTGST) shall be utilized against output tax liability of Integrated Tax (IGST), Central Tax (CGST) and State /UT Tax (SGST/ UTGST) only after the input tax credit available on account of Integrated Tax (IGST) has first been utilized fully.

  • Presently the GSTN portal supports the order of utilization of input tax credit in accordance with the provision before implementation of Section 49A and Section 49B of CGST Amendment Act 2018. Therefore, till the new order of utilization as per newly inserted Rule 88A of the CGST Rules 2017 is enabled on the common portal, taxpayers may continue to utilize their input tax credit as per the functionality available on the common portal.

Below chart represents the new input tax credit set-off mechanism:

Input tax credit on account of

Output liability on account of Integrated Tax (IGST) Output liability on account of Central Tax (CGST) Output liability on account of State Tax (SGST)

Integrated Tax (IGST)

(I)

(II) – In any order and in any proportion

(III) Input tax Credit on account of Integrated tax to be completely exhausted mandatorily

Central Tax (CGST)

(V)

(IV)

Not permitted

State Tax (SGST) (VII) Not permitted

(VI)

The automated new set-off template in excel format can be downloaded from the below link:

https://taxguru.in/wp-content/uploads/2019/05/New-ITC-Set-off-Template-GST.xls

The author can be reached at dipak.tiwary@outlook.com / 9823741187.

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