Input Tax Credit (ITC) is credit available to a person registered under Goods & Service Tax on payment of Input Tax. The amount of ITC in GST available in Electronic Credit Ledger which shall be adjusted against output tax liability of the taxpayer.
As per Rule 88A from a notification released by the Central Board of Indirect Taxes & Customs, taxpayers shall first use the Input Tax Credit available from Integrated Goods & Service Tax (IGST) to pay off all of their applicable IGST. Any Input Tax Credit remaining after setting off IGST can be used further towards paying CGST, SGST/UGST. It is mandatory to utilize the entire IGST available in electronic credit ledger before utilizing ITC on CGST or SGST. The order of setting off ITC of IGST can be done in any proportion and in any order towards setting off the CGST or SGST output after utilizing the same for IGST output.
Before the Implementation of Rule 88A the GST Input Tax Credit was utilized as follows:
|
Payment |
First set off from | Then set off from |
|
IGST |
IGST | CGST & SGST/UTGST |
| CGST | CGST |
IGST |
| SGST/UTGST | SGST/UTGST |
IGST |
After the implementation of Rule 88A the GST Input Tax Credit is utilized as follows:
|
Payment |
First set off from | Then set off from |
|
IGST |
IGST | CGST & SGST/UTGST |
| CGST | IGST |
CGST |
| SGST/UTGST | IGST |
SGST/UTGST |
Example:
Mr. A has the following tax liability and ITC for the tax period:
|
Type of GST Tax |
Output Liability | Input Tax Credit (ITC) |
|
IGST |
1000 | 2000 |
|
CGST |
1000 |
600 |
| SGST/UTGST | 1000 |
600 |
| TOTAL | 3000 |
3200 |
.
Input Tax Credit of IGST can be utilized in 3 different cases:
Case 1: Set off of unutilized Integrated Goods & Service Tax (IGST) credit completely towards CGST:
|
Type of GST Tax |
Liability | Credit Available | Set-off of Liability | Balance to be paid in cash | Balance credit available |
|
IGST |
1000 | 2000 | 1000 (From IGST) | – |
– |
| CGST | 1000 | 600 | 1000 (From IGST)* | – |
600 |
| SGST/UTGST | 1000 | 600 | 600 (From SGST/UTGST |
400 |
Case 2: Set off of unutilized Integrated Goods & Service Tax (IGST) credit completely towards SGST:
|
Type of GST Tax |
Liability | Credit Available | Set-off of Liability | Balance to be paid in cash | Balance credit available |
|
IGST |
1000 | 2000 | 1000 (From IGST) | – | – |
| CGST | 1000 | 600 | 600 (From CGST) | 400 |
– |
| SGST/UTGST | 1000 | 600 | 1000 (From IGST)* | – |
600 |
Case 3: Set off of unutilized Integrated Goods & Service Tax (IGST) credit Proportionately towards CGST & SGST Liability equally:
|
Type of GST Tax |
Liability | Credit Available | Set-off of Liability | Balance to be paid in cash | Balance credit available |
|
IGST |
1000 | 2000 | 1000 (From IGST) | – | – |
| CGST | 1000 | 600 | 500 (From IGST)* & 500 (From CGST) |
100 |
|
| SGST/UTGST | 1000 | 600 | 500 (From IGST)* & 500 (From CGST/UTGST) |
100 |
Note:
- It is advisable to follow Case 3 to optimize credit utilization.
- Central Goods & Services Tax (CGST) credit cannot be adjusted against State Goods & Service Tax (SGST) Payable. Similarly, State Goods & Service Tax (SGST) Credit cannot be adjusted against Central Goods & Services Tax (CGST) Payable.
In case of any query related to GST Return or to undertake the process of claiming Input Tax Credit, Contact your Trustworthy Advisor ‘Manthan Experts’.
Knowledge Source:
Input Tax Credit (ITC) Under GST
New GST rule 86B, Restriction on ITC Availment