The criteria for setting off of Input Tax Credit (ITC) has been changed under GST thru Central Goods & Services Tax (Amendment) Act 2018, which has been made effective from 1st February 2019.

As per old rules, following was the priority of set-off of ITC was as below:

  • For CGST Output – First set off thru ITC of CGST, then IGST
  • For SGST Output – First set off thru ITC of SGST, then IGST
  • For IGST Output – First set off thru ITC of IGST, then CGST & then SGST

As per CGST (Amendment) Act 2018, the priority of set-off of ITC is as below:

  • For CGST Output- First set off thru ITC of IGST, then CGST
  • For SGST Output – First set off thru ITC of IGST, then SGST
  • For IGST Output – First set off thru ITC of IGST, then CGST & then SGST

Following new sections have been inserted thru CGST (Amendment) Act 2018:

As per Section 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.

As per Section 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.

Let us understand the same with help of an example:

Head Output Liability Input Tax Credit available
(ITC)
As per old Set-off rules As per revised Set-off rules (applicable from 1st Feb 2019)
Paid thru ITC Paid thru Cash Paid thru ITC Paid thru Cash
CGST 800 500 CGST- 500
IGST- 300
0 IGST- 800 0
SGST 400 200 SGST-200
IGST-200
0 SGST- 200 200
IGST 0 800 0

 (Author can be reached at Mail Id : simrankatyal96@gmail.com)

Author Bio

More Under Goods and Services Tax

One Comment

Leave a Comment

Your email address will not be published. Required fields are marked *