Utlisation of Input Tax Credit

Utilization of Input Tax Credit

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Utilization of Input Tax Credit 

The Central Goods and Service Tax (Amendment) Act, 2018 has been made effective from 1st February 2019 and the said amendment has resulted into various changes in the utilization of input tax credit and the same is taken up in the current article. Following is the list of amendments made effective from 1st February 2019 which affects utilization of input tax credit –

  • Proviso inserted to section 49 (5) (c);
  • Proviso inserted to section 49 (5) (d);
  • New section 49A introduced.

All the above three amendments are being explained in-depth herein below –

Proviso has been Inserted to Section 49 (5) (C)

  • An input tax credit of SGST (state tax) shall be utilized towards payment of IGST (integrated tax) only and only when the balance of input tax credit of CGST (central tax) is not available.
  • In nut-shell, the balance of input tax credit of CGST should be utilized first and only then the balance of input tax credit of SGST can be used towards payment of IGST.

Proviso has been Inserted to Section 49 (5) (D)

  • An input tax credit of UTGST (union territory tax) shall be utilized towards payment of IGST (integrated tax) only and only when the balance of input tax credit of CGST (central tax) is not available.
  • In nut-shell, the balance of input tax credit of CGST should be utilized first and only then the balance of input tax credit of UTGST can be used towards payment of IGST.

New Section 49A has been Inserted

  • An input tax credit of IGST needs to be fully utilized first.
  • Only after fully utilization of input tax credit of IGST, input tax credit of CGST, SGST / UTGST can be utilized towards payment of IGST, CGST, SGST or UTGST.

The effect of above all the amendments has been summarized in the below-mentioned table for better understanding

Type of Input Tax Credit Sequence of Utilization of Input Tax Credit Remarks
First Second Third
Integrated tax (IGST) IGST CGST SGST First of all input tax credit of IGST needs to be utilized fully
Central Tax (CGST) CGST IGST
State Tax (SGST) SGST IGST Credit of SGST can be utilized towards payment of IGST only when the balance of CGST is not available.
Union territory tax (UTGST) UTGST IGST Credit of UTGST can be utilized towards payment of IGST only when the balance of CGST is not available.

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