Rule 88A has been inserted by the Central Goods and Services Tax (Second Amendment) Rules, 2019 with effect from 29.03.2019.
According to the Rule, Input tax credit on account of integrated tax shall be utilized towards payment of integrated tax, the amount remains, if any, may be utilized towards the payment of Central Tax and State tax or Union Territory tax, as the case may be, in any order.
Before the introduction of Rule 88A the input tax credit utilized like CGST and SGST input first set off against CGST and SGST liabilities , then IGST input sef off against IGST liability then remaining portion of IGST input set off against CGST and SGST liability. So Input credit tax left to the extent of IGST only.
At the present scenario ITC in respect of IGST will first set off against IGST liability, then with CGST liability and remaining if any with SGST. After set off IGST liability, CGST input set off against CGST liability and SGST input set off against SGST liability. So there is chance that balance of CGST input will move faster and cash payment will arise in respect of SGST liability.
Now the Rule 88A says set off IGST credit with CGST and SGST (after setoff IGST liability) may be utilized, in any order. So one can set off of IGST with CGST and SGST in any manner, in any amount, after considering the amount of CGST and SGST input to be set off against CGST and SGST liabilities, where cash payment will be less.
ITC on account of Central Tax, State tax or Union Territory tax shall be utilized towards the payment of IGST , CGST and SGST or UGST , only when total Credit of IGST ha been first utilized.
It is new path of availing input tax credit , where optimum credit can be availed . This method of utilization of input credit tax obviously better than the method before introduction of Rule 88A.
All business house will be benefited by the introduction of the said Rule in respect of availing of input credit tax.