Sub section 5 of Section 49 of CGST Act, 2017 states the manner of utilization of Input Tax Credit in the following manner:

-integrated tax shall first be utilized towards payment of integrated tax and the amount remaining, if any, may be utilized towards the payment of central tax and State tax, or as the case may be, Union territory tax, in that order;

-the central tax shall first be utilized towards payment of central tax and the amount remaining, if any, may be utilized towards the payment of integrated tax;

-the State tax shall first be utilized towards payment of State tax and the amount remaining, if any, may be utilized towards payment of integrated tax.

Amendment in clause “c”

Provided that the input tax credit on account of state tax shall be utilized towards payment of integrated tax only where the balance of the input tax credit on account of central tax is not available for payment of integrated tax;

-the Union territory tax shall first be utilized towards payment of Union territory tax and the amount remaining, if any, may be utilized towards payment of integrated tax

Amendment in clause “d”

Provided that the input tax credit on account of Union territory tax shall be utilized towards payment of integrated tax only when the balance of the input tax credit on account of central tax is not available for payment of integrated tax

Amendment made in clause “c” and clause “d” can be understand with the help of following example :

IGST Liability: Rs. 25,000

CGST Input: Rs. 20,000

SGST/ UTGST Input:  Rs. 15,000

Before 01.02.2019 On or after 01.02.2019 as per CGST Amendment Act, 2018
SGST/ UTGST: Rs. 15,000

CGST: Rs. 10,000

CGST: Rs. 20,000

SGST/ UTGST: Rs. 5,000

  • the central tax shall not be utilized towards payment of State tax or Union territory tax; and
  • The State tax or Union territory tax shall not be utilized towards payment of central tax.

Sec. 49A of CGST Act, 2017:

Notwithstanding anything contained in section 49, the input tax credit on account of central tax, State tax or Union territory tax shall be utilized 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 utilized fully towards such payment.

Sec.49B of CGST Act, 2017:

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 utilization 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.”.

Conclusion:

We have to first utilize the input tax credit of IGST, and then for the balance liability we can utilize CGST/SGST input tax credit. The following sequence required to be maintained:

According to old law i.e. before 01.02.2019

IGST Liability CGST Liability SGST Liability
  • IGST Credit
  • CGST or SGST Credit
  • CGST Credit
  • IGST Credit
  • SGST Credit
  • IGST Credit

 According to Amended CGST Act, 2018 i.e. on or after 01.02.2019

IGST Liability CGST Liability SGST Liability
  • IGST Credit
  • CGST Credit
  • SGST Credit
  • IGST Credit
  • CGST Credit
  • IGST Credit
  • SGST Credit

Let us understand both the old and new scenario with an example:

Old Scenario:

Taxes Liability

(Rs.)

Input Tax Credit (Rs.) Adjustment from ITC Balance need to pay in Cash (Rs.)
IGST 10 25 Rs. 10 (IGST) 0
CGST 30 25 Rs. 25 (CGST)

Rs. 5 (IGST)

0
SGST 30 25 Rs. 25 (SGST)

Rs. 5 (IGST)

0

New Scenario:

Taxes Liability

(Rs.)

Input Tax Credit (Rs.) Adjustment from ITC Balance need to pay in Cash (Rs.)
IGST 10 25 Rs. 10 (IGST) 0
CGST 30 25 Rs. 15 (IGST)

Rs. 15 (CGST)

0
SGST 30 25 Rs. 25 (SGST) 5

*Hence, in the above example under the new law registered person is required to pay tax where as in the old scenario the liability of GST get adjusted towards inputs.

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2 Comments

  1. HEMANT says:

    Sir, Can we use IGST Input as 50% for Payment of Cgst and 50% for Payment of Sgst. Assume in the above example of new scenario we use balance igst of Rs. 15 for payment of Cgst Rs. 7.5 and for Sgst Rs. 7.5. Then Cash liability arise for Cgst Rs. 2.5 and Sgst Rs. 2.5.

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