Sandeep Ahuja & Co.

Established in the year 1986, we are a leading chartered accountancy firm based in Delhi & NCR rendering comprehensive professional services which include statutory audit, internal audit, direct tax, transfer pricing, GST, bank audit, propriety audit, cost accounting, internal financial controls and risk advisory.

Saturday, April 6, 2019

New Method of Utilization of ITC under GST (w.e.f. 23-Mar-19)

With effect from 29th March, 2019, the manner of utilization of Input Tax Credit (ITC) has been amended vide Notification No. 16/2019-CT, following which Rule 88A has been introduced. It states as under:

“Rule 88A: Order of utilization of input tax credit – Input tax credit on account of Integrated Tax shall first be utilised towards payment of Integrated Tax, and the amount remaining, if any, may be utilised towards the payment of Central Tax and State Tax or Union Territory Tax, as the case may be, in any order:

Provided that 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.”

Here’s breaking down the change for you.

1. If you have IGST Input Credit, first exhaust that for payment of IGST Output

2. If there is any IGST ITC left thereafter, use it for payment of CGST and SGST Output, now in no particular order, i.e. you can use the remaining IGST ITC to pay both CGST and SGST equally. It will not follow the sequence of first setting it off against CGST Output and then the remaining against SGST Output.

3. Credit can be taken in any order.

4. ITC of CGST and SGST can be utilized towards payment of IGST, CGST, SGST only after exhausting the ITC of IGST.

5. It still remains that the ITC of CGST cannot be used to pay SGST, and ITC of SGST cannot be used to pay CGST.

To put it simply, the following tables show how the manner of utilizing GST ITC has changed in the past few months.


Up to 31-Jan-2019
Payment For
First Set off From
Then Set off From
IGST
IGST
CGST and SGST
CGST
CGST
IGST
SGST
SGST
IGST

From 01-Feb-2019 due to Section 49A of CGST (Amendment) Act, 2018
Payment For
First Set off From
Then Set off From
IGST
IGST
CGST and SGST
CGST
IGST ITC left after setting off IGST
CGST
SGST
IGST ITC left after setting off IGST and CGST
SGST

From 29-Mar-2019 due to Rule 88A – Order of utilizing IGST ITC against CGST and SGST is done away with
Payment For
First Set off From
Then Set off From
SGST
IGST ITC left after setting off IGST
SGST
CGST
IGST ITC left after setting off IGST
CGST
IGST
IGST
CGST and SGST

Illustration 1: ITC Utilization in Case of No IGST Liability
w.e.f. 29-Mar-19
IGST
CGST
SGST
ITC Available
1000
1000
1000
Output Tax Payable
NIL
2000
2000




IGST Utilized
NIL
500
500
CGST Utilized
NIL
1000
N.A.
SGST Utilized
NIL
N.A.
1000




ITC Balance
NIL
NIL
NIL
Payment in Cash
NIL
500
500

Illustration 2: ITC Utilization in Case of IGST Liability
w.e.f. 29-Mar-19
IGST
CGST
SGST
ITC Available
1000
1000
1000
Output Tax Payable
500
500
500




IGST Utilized
500
250
250
CGST Utilized
NIL
250
N.A.
SGST Utilized
NIL
N.A.
250




ITC Balance Carried Fwd
NIL
750
750
Payment in Cash
NIL
NIL
NIL

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