CHANGE IN INPUT TAX CREDIT ENTITLEMENT UNDER GST
By: – Dr. Sanjiv Agarwal
Goods and Services Tax – GST
Dated:- 9-3-2019<\/p>\n
GST laws have been amended w.e.f. 01.02.2019 which inter alia includes amendment in manner of taking input tax credit amongst three formats of GST vis IGST, CGST and SGST. This has resulted in undue hardship to many taxpayers across the country.
\nGoods and services tax involves two equal components on any transaction, CGST and SGST \/ UTGST. Inter-state supplies attract integrated goods and services tax (IGST), which is eventually apportioned between the Union and state Governments.
\nLaw Prior to 1st February, 2019
\nSection 49 of the CGST Act, 2017 contains provisions in relation to payment of tax, interest, penalty and other amounts. Sub-section 5 in relation to input tax credit states as under:
\nThe amount of input tax credit available in the electronic credit ledger of the registered person on account of
\n * integrated tax shall first be utilised to<\/p>\n
= = = = = = = =<\/p>\n
Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n lity, e.g IGST can be set off against IGST and then CGST and SGST, CGST can be set off against CGST and then against IGST, and SGST can be set off against SGST and then against IGST. = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n n utilized fully towards such payment. = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n TC Available = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n he goods and service tax (CGST and SGST) unless credits for taxes paid on inter-state transactions are fully used. The amendment prescribes the order in which credits for past payment of various components of goods and services tax can be adjusted against the tax liability on the final output of a business. = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n","protected":false},"excerpt":{"rendered":" CHANGE IN INPUT TAX CREDIT ENTITLEMENT UNDER GSTBy: – Dr. Sanjiv Agarwal Goods and Services Tax – GSTDated:- 9-3-2019 GST laws have been amended w.e.f. 01.02.2019 which inter alia includes amendment in manner of taking input tax credit amongst three formats of GST vis IGST, CGST and SGST. This has resulted in undue hardship to … Continue reading “CHANGE IN INPUT TAX CREDIT ENTITLEMENT UNDER GST”<\/span><\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[],"tags":[],"class_list":["post-17235","post","type-post","status-publish","format-standard","hentry"],"_links":{"self":[{"href":"https:\/\/goodsandservicetax.in\/GST\/index.php?rest_route=\/wp\/v2\/posts\/17235","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/goodsandservicetax.in\/GST\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/goodsandservicetax.in\/GST\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/goodsandservicetax.in\/GST\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/goodsandservicetax.in\/GST\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=17235"}],"version-history":[{"count":0,"href":"https:\/\/goodsandservicetax.in\/GST\/index.php?rest_route=\/wp\/v2\/posts\/17235\/revisions"}],"wp:attachment":[{"href":"https:\/\/goodsandservicetax.in\/GST\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=17235"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/goodsandservicetax.in\/GST\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=17235"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/goodsandservicetax.in\/GST\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=17235"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}
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\nThe Government has amended CGST Act, 2017 vide CGST Amendment Act, 2018 with various changes w.e.f 01.02.2019 and one of the important amendment was made in Section 49 of CGST Act by introducing new section 49A to the CGST Act, 2017.
\nAccordingly, the balance in credit ledger can be used only for making the payment of tax as CGST, SGST or IGST. Besides, the balance in such ledger will get reduced by amount of refund in case sought under the provisions of the Act.
\nThe credit ledger shows the balance of credit lying in CGST, SGST or IGST. The amount under various heads of credit could be used in the following order of preference:
\n * IGST can be used:
\n * For payment of tax as IGST
\n * For payment of tax as CGST
\n * For payment of tax as SGST
\n\tCGST can be used:
\n * For payment of tax as CGST
\n * For payme<\/p>\n
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\n49B. 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
\nAccordingly, Government has changed the order of setoff of input tax credit by introducing section 49A w.e.f. 01.02.2019 according to which, IGST Credit shall be set off fully before taking any setoff of CGST or SGST, which means earlier CGST\/SGST ITC was used to set-off CGST \/SGST liability, as the case may be, but now IGST Credit has to be first utilized fully for payment of IGST then for CGST and then for SGST liability as the case may be, even before utilization of ITC of CGST or SGST.
\nThe following matrix explains the manner of credit w.e.f. 01.02.2019 for any tax payments to be made:
\nPayment for
\nFirst set off from
\nThen set off from
\nSGST
\nIGST
\nSGST
\nCGST
\nIGST
\nCGST
\nIGST
\nIGS<\/p>\n
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\nIGST
\nCGST
\nSGST
\nTo be paid by Cash Ledger
\nTax liability
\n(200)
\n(50)
\n(50)
\nIGST
\n100
\n100
\n–
\n–
\n–
\nCGST
\n100
\n100
\n–
\n–
\n–
\nSGST
\n100
\n–
\n–
\n50
\n50
\nITC Balance
\n–
\n50
\n–
\n–
\nAs can be seen, that the amount is not different in both the cases. But the tax of the SGST should be paid from the cash ledger even when there is credit in the CGST head. ₹ 50 is to paid in cash.
\nThus, IGST credit is to be used against IGST and also IGST first need to be set off against CGST and then only CGST credit can be set off against CGST. Also, the ITC of CGST can't be utilized against the SGST or vice-versa.
\nOne of the major positive impact for the states and revenue (and adverse for assesses) of the change in matrix for claiming input tax credit w.e.f. 1st February, 2019 will be that it will force the taxpayers to pay IGST out of pocket inspite of there being unutilized credit of CGST or SGST or UTGST lying in their electronic credit ledger. They cant use such input tax credit <\/p>\n
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\nThis, in many cases would lead to a situation where the more flexible integrated goods and services credit is used up for paying CGST liability fully, forcing businesses to pay fully or partly SGST liability in cash, thus taking away the flexibility in utilization of tax credits. Unlike credits for integrated goods and services, the same for CGST and SGST can't be cross-utilized. This result in tax payment in cash while tax credits remain on the books of the company.
\n Reply By SESHU KUMAR as =
\nThis whole article is mentioning about Taking credit while the same has to be read as utilization of credit.
\n Dated: 24-3-2019
Scholarly articles for knowledge sharing by authors, exper<\/p>\n
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