CBIC Notifies applicability of CGST (Amendment) Act, 2018 with effect from 1st February 2019 vide Notification No. 02/2019 Central Tax Dated 29.01.2019.

One of the important amendment was made in Section 49 CGST Act, 2017 by introducing new section 49A & 49B under The CGST Act 2017.

After section 49 of the principal Act, the following sections (49A & 49B) were inserted, namely: –

Utilisation of input tax credit subject to certain conditions

“49A. Notwithstanding anything contained in section 49, 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 towards such payment.”

Order of utilisation of input tax credit

“49B. Notwithstanding anything contained in this Chapter and subject to the provisions of clause (e) and clause (f) of sub-section (5) of section 49, the Government may, on the recommendations of the Council, prescribe the order and manner of utilisation of the input tax credit on account of integrated tax, central tax, State tax or Union territory tax, as the case may be, towards payment of any such tax.”.

Section 49A provides that ITC of CGST and SGST shall be utilised only after the ITC of IGST has been first utilised fully toward payment of IGST, CGST & SGST. Accordingly, Section 49A provides single restriction that ITC of IGST must be first full exhausted before utilising the ITC of CGST & SGCT. Newly inserted section 49A does not provide order of utilisation of ITC.

Subsection 5 of Section 49 of CGST Act 2017 deals about order of utilising Input Tax Credit (ITC) for payment of GST output Tax liability. The same is as follows: –

“(5) The amount of input tax credit available in the electronic credit ledger of the registered person on account of––

(a) 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 as the case may be, Union territory tax, in that order;

(b) the central tax shall first be utilised towards payment of central tax and the amount remaining, if any, may be utilised towards the payment of integrated tax;

(c) the State tax shall first be utilised towards payment of State tax and the amount remaining, if any, may be utilised towards payment of integrated tax;

(d) the Union territory tax shall first be utilised towards payment of Union territory tax and the amount remaining, if any, may be utilised towards payment of integrated tax;

(e) the central tax shall not be utilised towards payment of State tax or Union territory tax; and

(f) the State tax or Union territory tax shall not be utilised towards payment of central tax.”

The section 49A starts with “Notwithstanding anything contained in section 49”, it means Section 49A override entire section 49 to the extent it contradicts section 49A. Section 49(5) provides order of utilisation of ITC and section 49A provides restriction to use of ITC of CGST & SGST before utilisation of ITC of IGST for payment of IGST, CGST & SGST. Since, section 49A does not speaks about order of utilisation of ITC therefore it shall not override section 49(5). Hence, the order of utilisation of ITC provided under section 49 is still unaffected with the introduction of section 49A.

Let us understand the effect of the provision of the Section 49A with the help of the examples.

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

Example 1

ITC ITC  Amount Liability 1st  Adjustment 2nd  Adjustment Balance  to Pay in Cash Balance ITC
IGST 150 110 Rs.110-100(IGST)
CGST 100 80 Rs. 80-40 (IGST) Rs 40-40 (CGST) 60(CGST)
SGST 100 80 Rs. 80-80 (SGST) 20(SGST)

 Example 2

ITC ITC  Amount Liability 1st  Adjustment 2nd  Adjustment Balance  to Pay in Cash Balance ITC
IGST 50 110 Rs. 110-50 (IGST) 60 60
CGST 50 80 Rs. 80-50 (CGST) 30
SGST 50 80 Rs. 80-50 (SGST) 30

Hope the readers will find the above article useful. In case of any query/information, feel free to write back to us.

The views, thoughts, and opinions expressed in this article belong solely to the author, and not necessarily represent or reflect the views of the author’s employer, organization, committee or other group or individual.

(The author can be reached at Sandeep.purohit1@yahoo.com)

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Qualification: CA in Job / Business
Company: SS Gupta, Goregaon
Location: Mumbai, Maharashtra, IN
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3 Comments

  1. Bhushan Paithankar says:

    New rule 49A CGST act is applicable or till tis pending for utilization of payment.
    IGST – to IGST-CGST-SGST
    CGST- to IGST-CGST
    SGST- to IGST -SGST payments.
    Please confirm

    1. sandeeppurohit says:

      New rule 49A of CGST act is applicable and portal also functioning as per this Rule.

      IGST (credit) – to IGST (1st) then CGST or SGST
      CGST (Credit) – to CGST (1st) then IGST
      SGST (Credit) – to SGST (1st) then IGST

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