Issues w.r.t. order of utilizing GST ITC clarified by CBIC

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W.e.f February 1, 2019, Section 49 of the CGST Act, 2017 (CGST Act) was amended and Section 49A and Section 49B were inserted vide CGST Amendment Act, 2018.

Due to bringing into force of Section 49A of the CGST Act, various issues has arisen in respect to manner of utilization of input tax credit (“ITC”) of IGST in a particular order, resulting in accumulation of ITC for one kind of tax (say SGST) in electronic credit ledger and discharge of liability for the other kind of tax (say CGST) through electronic cash ledger in certain scenarios. Accordingly, Rule 88A was inserted in the CGST Rules, 2017 (“CGST Rules”) vide Notification No. 16/2019- Central Tax dated March 29, 2019.

Now, in order to ensure uniformity, the CBIC vide its Circular No. 98/17/2019-GST dated April 23, 2019 has clarified the manner of utilization of GST ITC with an example, in the following manner:

  • The newly inserted Rule 88A of the CGST Rules allows utilization of IGST credit towards the payment of CGST and SGST/ UTGST, in any order subject to the condition that the entire ITC on account of IGST is completely exhausted first before the ITC on account of CGST or SGST/ UTGST can be utilized.
  • After the insertion of the said rule, the order of utilization of ITC will be as per the order (of numerals) given below:

    Input tax Credit on account of

    Output liability on account of Integrated tax Output liability on account of Central tax

    Output liability on account of State tax / Union Territory tax

    Integrated tax

    (I)

    (II) – In any order and in any proportion

     (III) Input tax Credit on account of Integrated tax to be completely exhausted mandatorily

    Central tax

    (V) (IV) Not permitted
    State tax / Union Territory tax (VII) Not permitted

    (VI)

  • Till the new order of utilization as per newly inserted Rule 88A of the CGST Rules is implemented on the common portal, taxpayers may continue to utilize their ITC as per the functionality available on the common portal, which supports utilization as per pre-amended law i.e. pre-insertion of Section 49A and Section 49B of the CGST Act.

The complete circular can be accessed at: http://www.a2ztaxcorp.com/wp-content/uploads/2019/04/Circular-98-17-2019-GST.pdf