{"id":16191,"date":"2019-05-04T20:27:13","date_gmt":"2019-05-04T14:57:13","guid":{"rendered":"https:\/\/enterslice.com\/learning\/?p=16191"},"modified":"2021-03-23T12:56:14","modified_gmt":"2021-03-23T07:26:14","slug":"changes-in-utilization-of-input-tax-credit-under-the-gst-act","status":"publish","type":"post","link":"https:\/\/enterslice.com\/learning\/changes-in-utilization-of-input-tax-credit-under-the-gst-act\/","title":{"rendered":"Changes in Utilization of Input Tax Credit under the GST Act"},"content":{"rendered":"<p>Utilization of Input Tax Credit simply means availing the Input of IGST, CGST and SGST\/UTGST accumulated on account of &ldquo;Input goods and services&rdquo;&nbsp; for payment of Output Tax Liability which arises on account of Supply of Goods and Services. Recently there have been made changes <strong>w.e.f 01.02.2019<\/strong> on utilization of Input Tax Credit of IGST, CGST and SGST\/UTGST to minimize fund settlement on account of IGST. Pre and Post change scenarios have been explained below and also the clarification dated 23.04.2019 have also been explained for ease of understanding. This article is describing Changes in the Utilization of Input Tax Credit under the GST Act.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">Pre <a class=\"glossaryLink\"  aria-describedby=\"tt\"  data-cmtooltip=\"&lt;div class=glossaryItemTitle&gt;Amendment&lt;\/div&gt;&lt;div class=glossaryItemBody&gt;An &amp;quot;amendment&amp;quot; refers to the formal change or correction of a legal document, often involving additions, variations, or deletions to address irregularities or clarify points in an agreement.(...)&lt;\/div&gt;\"  href=\"https:\/\/enterslice.com\/learning\/terms\/amendment\/\"  data-gt-translate-attributes='[{\"attribute\":\"data-cmtooltip\", \"format\":\"html\"}]'>Amendment<\/a> Scenario<\/h2>\n\n\n\n<p>Section\n49 of the CGST Act provides for the manner of utilization of the Input tax\ncredit.<\/p>\n\n\n\n<p>The order of <strong><a href=\"https:\/\/enterslice.com\/learning\/itc-rules-for-capital-goods-under-gst\/\">Input tax credit (ITC)<\/a><\/strong> set-off provided under the existing law can be summarized as under:<\/p>\n\n\n\n<ul><li><strong>Transactions within the state (Intra-State Transactions):<\/strong><\/li><\/ul>\n\n\n\n<p><strong>CGST- <\/strong>credit of CGST is to be utilized subsequently for :<\/p>\n\n\n\n<p>a. CGST<\/p>\n\n\n\n<p>b. IGST<\/p>\n\n\n\n<p><strong>SGST\/UTGST- <\/strong>credit of SGST\/UTGST is to be utilized subsequently for :<\/p>\n\n\n\n<p>a. SGST\/UTGST<\/p>\n\n\n\n<p>b. IGST<\/p>\n\n\n\n<ul><li><strong>Transactions outside the state (Inter State transactions):<\/strong><\/li><\/ul>\n\n\n\n<p><strong>IGST- <\/strong>credit of IGST is to be utilized subsequently for :<\/p>\n\n\n\n<p>IGST<\/p>\n\n\n\n<p>CGST<\/p>\n\n\n\n<p>SGST\/UTGST<\/p>\n\n\n\n<p><strong>Cross utilization\nof CGST and SGST\/UTGST is not permissible.<\/strong><\/p>\n\n\n\n<p>However, various representations\nhave been received from the trade taxpayers, regarding the issue of <\/p>\n\n\n\n<p>Utilization of input tax credit\nof IGST in a particular order. This has resulted in <a class=\"glossaryLink\"  aria-describedby=\"tt\"  data-cmtooltip=\"&lt;div class=glossaryItemTitle&gt;Accumulation&lt;\/div&gt;&lt;div class=glossaryItemBody&gt;Accumulation refers to the gradual increase or gathering of something over a period of time. In finance, it often pertains to the incremental growth of asset value or portfolio through multiple(...)&lt;\/div&gt;\"  href=\"https:\/\/enterslice.com\/learning\/terms\/accumulation\/\"  data-gt-translate-attributes='[{\"attribute\":\"data-cmtooltip\", \"format\":\"html\"}]'>accumulation<\/a> of input tax\ncredit for one kind of tax in the electronic credit ledger and discharge the\nliability of other kind of tax in the electronic cash ledger. This means that\nin spite of having a certain amount of ITC available to the taxpayer, he still\nneeds to pay the GST amount from his pocket as the available ITC is not the\nsame kind of tax.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">Post Amendment Scenario ( w.e.f 01.02.2019 )<\/h2>\n\n\n\n<p>&nbsp;Clauses (c) and (d) of Section 49(5) of the\nCGST Act are amended vide the CGST Amendment Act, 2018 with effect from 1<sup>st<\/sup>\nFebruary, 2019. The <strong>amendment<\/strong>\nprovides that the credit of SGST\/UTGST can be utilized for the payment of IGST\nonly when the balance of the input tax credit on account of CGST is not\navailable for the payment of IGST.<\/p>\n\n\n\n<p>Further,\nnew sub-sections 49A and 49B are also inserted, also with effect from 1<sup>st<\/sup>\nFebruary, 2019 vide the CGST Amendment Act, 2018 which provides that the\ntaxpayer should utilize the credit of IGST completely before any ITC of CGST or\nSGST\/UTGST can be utilized to discharge any tax liability. Also, credit of IGST\nhas to be utilized first for the payment of IGST, then CGST and SGST in that\norder compulsorily.<\/p>\n\n\n\n<p>This\npurpose of this change is to minimize the funds settlement on account of IGST.<\/p>\n\n\n\n<p>Therefore,\nthe manner of utilization of IGST credits <strong>post\neffective date of amendments<\/strong> is as follows:<\/p>\n\n\n\n<ul><li>Credit of IGST to be utilized <strong>first<\/strong> for liability of : IGST&rarr;CGST&rarr;SGST<strong> THEN<\/strong><\/li><li>Credit of CGST to be utilized first for the liability of : CGST\/IGST ( If any )<\/li><li>Credit of SGST to be utilized first for the liability of : SGST\/IGST ( If any )<\/li><li>Credit of UTGST to be utilized first for the liability of: UTGST\/IGST ( If any).<\/li><\/ul>\n\n\n\n<h2 class=\"wp-block-heading\">Recent Change Made &ndash;Circular Dated 23.04.2019<\/h2>\n\n\n\n<p><strong>After the amendment<\/strong>, in certain cases, where a\nperson has to discharge his tax liability on account of single type of tax (say\nSGST) through electronic cash ledger, while the input tax credit on account of\nother type of tax(say CGST) remains un-utilized in the electronic credit\nledger.<\/p>\n\n\n\n<p>To overcome this issue,<strong> a circular dated 23.04.2019<\/strong> is issued (<strong>Circular No. 98\/17\/2019-GST<sup><a href=\"http:\/\/www.cbic.gov.in\/resources\/\/htdocs-cbec\/gst\/Circular-98-17-2019-GST.pdf;jsessionid=353FB1542C9E223F644F02E47E6843D5\"><strong>[1]<\/strong><\/a><\/sup>) <\/strong>in which a newly inserted <strong>rule 88A<\/strong> in the CGST rules allow utilization of input tax credit of IGST towards payment of CGST and SGST\/UTGST, <strong>in any order, <em>subject to the condition that the entire input tax credit on account of IGST is completely exhausted first<\/em><\/strong> before the input tax credit of CGST, or SGST, or UTGST can be utilized. It is clarified after the insertion of the said rule, the order of utilization of input tax credit will be as per the order mentioned below: <\/p>\n\n\n\n<figure class=\"wp-block-image\"><img decoding=\"async\" loading=\"lazy\" width=\"630\" height=\"204\" src=\"https:\/\/enterslice.com\/learning\/wp-content\/uploads\/2019\/05\/RECENT-CHANGE-MADE.png\" alt=\"Recent Change Made &ndash;Circular Dated 23.04.2019\" class=\"wp-image-16194\" srcset=\"https:\/\/enterslice.com\/learning\/wp-content\/uploads\/2019\/05\/RECENT-CHANGE-MADE.png 630w, https:\/\/enterslice.com\/learning\/wp-content\/uploads\/2019\/05\/RECENT-CHANGE-MADE-300x97.png 300w\" sizes=\"(max-width: 630px) 100vw, 630px\"\/><\/figure>\n\n\n\n<p>Therefore, the manner of\nutilization of IGST credits post effective date of amendments is as follows:<\/p>\n\n\n\n<ul><li>Credit of IGST to be utilized <strong>first<\/strong> for liability of : IGST&rarr;CGST, SGST, UTGST(in any manner and in any proportion)<\/li><li>Credit of CGST to be utilized first for the liability of : CGST\/IGST ( If any )<\/li><li>Credit of SGST to be utilized first for the liability of : SGST\/IGST ( If any )<\/li><li>Credit of UTGST to be utilized first for the liability of : UTGST\/IGST ( If any )<\/li><\/ul>\n\n\n\n<p><strong>The rule has been explained below through an illustration<\/strong>: <\/p>\n\n\n\n<p><strong>Amount of Input Tax credit and Output tax liability under different tax heads: <\/strong><\/p>\n\n\n\n<figure class=\"wp-block-table\"><table><tbody><tr><td>\n  <strong>Tax\n  Type<\/strong>\n  <\/td><td>\n  <strong>Input\n  Tax Credit<\/strong>\n  <\/td><td>\n  <strong>Output\n  tax Liability<\/strong>\n  <\/td><\/tr><tr><td>\n  IGST\n  <\/td><td>\n  2600\n  <\/td><td>\n  2000\n  <\/td><\/tr><tr><td>\n  CGST\n  <\/td><td>\n  400\n  <\/td><td>\n  600\n  <\/td><\/tr><tr><td>\n  SGST\/UTGST\n  <\/td><td>\n  400\n  <\/td><td>\n  600\n  <\/td><\/tr><tr><td>\n  Total\n  <\/td><td>\n  3400\n  <\/td><td>\n  3200\n  <\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n<p><strong>Option 1:<\/strong><\/p>\n\n\n\n<figure class=\"wp-block-table\"><table><tbody><tr><td>\n  <strong>Input tax credit on account of<\/strong>\n  <\/td><td>\n  <strong>Discharge of output liability\n  on account of IGST<\/strong>\n  <\/td><td>\n  <strong>Discharge of output tax\n  liability on account of CGST<\/strong>\n  <\/td><td>\n  <strong>Discharge of output tax\n  liability on account of SGST\/UTGST<\/strong>\n  <\/td><td>\n  <strong>Balance of Input tax credit<\/strong>\n  <\/td><\/tr><tr><td>\n  IGST\n  <\/td><td>\n  2000\n  <\/td><td>\n  400\n  <\/td><td>\n  200\n  <\/td><td>\n  0\n  <\/td><\/tr><tr><td><strong>Input tax credit on account of   IGST has been completely exhausted<\/strong>   <\/td><\/tr><tr><td>\n  CGST\n  <\/td><td>\n  0\n  <\/td><td>\n  200\n  <\/td><td>\n  &ndash;\n  <\/td><td>\n  200\n  <\/td><\/tr><tr><td>\n  SGST\/UTGST\n  <\/td><td>\n  0\n  <\/td><td>\n  &ndash;\n  <\/td><td>\n  400\n  <\/td><td>\n  0\n  <\/td><\/tr><tr><td>\n  Total\n  <\/td><td>\n  2000\n  <\/td><td>\n  600\n  <\/td><td>\n  600\n  <\/td><td>\n  200\n  <\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n<p><strong>&nbsp;Option 2:<\/strong><\/p>\n\n\n\n<figure class=\"wp-block-table\"><table><tbody><tr><td>\n  <strong>Input tax credit on account of<\/strong>\n  <\/td><td>\n  <strong>Discharge of output liability\n  on account of IGST<\/strong>\n  <\/td><td>\n  <strong>Discharge of output tax\n  liability on account of CGST<\/strong>\n  <\/td><td>\n  <strong>Discharge of output tax\n  liability on account of SGST\/UTGST<\/strong>\n  <\/td><td>\n  <strong>Balance of Input tax credit<\/strong>\n  <\/td><\/tr><tr><td>\n  IGST\n  <\/td><td>\n  2000\n  <\/td><td>\n  200\n  <\/td><td>\n  400\n  <\/td><td>\n  0\n  <\/td><\/tr><tr><td><strong>Input tax credit on account of   IGST has been completely exhausted<\/strong>   <\/td><\/tr><tr><td>\n  CGST\n  <\/td><td>\n  0\n  <\/td><td>\n  400\n  <\/td><td>\n  &ndash;\n  <\/td><td>\n  0\n  <\/td><\/tr><tr><td>\n  SGST\/UTGST\n  <\/td><td>\n  0\n  <\/td><td>\n  &ndash;\n  <\/td><td>\n  200\n  <\/td><td>\n  200\n  <\/td><\/tr><tr><td>\n  Total\n  <\/td><td>\n  2000\n  <\/td><td>\n  600\n  <\/td><td>\n  600\n  <\/td><td>\n  200\n  <\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n<h2 class=\"wp-block-heading\">Conclusion<\/h2>\n\n\n\n<p>Since the common portal is not updated with the changes made, presently it supports the order of utilization of ITC in accordance with the provisions before the amendment was made. Therefore till new changes are made on the common portal, taxpayers may continue to utilize their ITC as per existing provisions. To know more about Input Tax Credit under the GST, visit our official website <strong><a href=\"https:\/\/enterslice.com\/\">Enterslice<\/a><\/strong>.<\/p>\n\n\n\n<p class=\"text-left\"><b>Read our article<\/b>:<mark style=\"background: #fffd03 !important;\"><a href=\"https:\/\/enterslice.com\/learning\/no-e-way-bill-generation-in-case-of-non-filing-of-gst-return\/\">No E-Way Bill Generation in case of Non Filing of GST Return<\/a><\/mark><\/p>\n\n","protected":false},"excerpt":{"rendered":"<p>Utilization of Input Tax Credit simply means availing the Input of IGST, CGST and SGST\/UTGST accumulated on account of &ldquo;Input goods and services&rdquo;&nbsp; for payment of Output Tax Liability which arises on account of Supply of Goods and Services. Recently there have been made changes w.e.f 01.02.2019 on utilization of Input Tax Credit of IGST, [&hellip;]<\/p>\n","protected":false},"author":4,"featured_media":16228,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":[],"categories":[49],"tags":[12],"acf":{"service_id":"96"},"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v14.6.1 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>Changes in Utilization of Input Tax Credit under the GST Act - Enterslice<\/title>\n<meta name=\"description\" content=\"Changes in Input Tax Credit Utilization Under the GST Act are described in this article. 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