Utilization of Input Tax
Credit under GST in New Rule 88A
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Presently,
the common portal supports the order of utilization of input tax credit in
accordance with the provisions before implementation of the provisions of the CGST
(Amendment) Act i.e. pre-insertion of Section 49A and Section 49B of the CGST
Act. Therefore, 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 input tax credit as per the functionality available
on the common portal.
[Circular
No. 98/17/2019-GST dated 23rd April, 2019]
Subject:
Clarification in respect of utilization of input tax credit under GST.
Section 49 was amended and Section 49A and Section
49B were inserted vide Central Goods and Services Tax (Amendment) Act, 2018
[hereinafter referred to as the CGST (Amendment) Act]. The amended provisions
came into effect from 1st February 2019.
2. Various representations have been received from
the trade and industry regarding challenges being faced by taxpayers due to
bringing into force of section 49A of the Central Goods and Services Tax Act,
2017 (hereinafter referred to as the CGST Act). The issue has arisen on account
of order of utilization of input tax credit of integrated tax in a particular
order, resulting in accumulation of input tax credit for one kind of tax (say
State tax) in electronic credit ledger and discharge of liability for the other
kind of tax (say Central tax) through electronic cash ledger in certain
scenarios. Accordingly, rule 88A was inserted in the Central Goods and Services
Tax Rules, 2017 (hereinafter referred to as the CGST Rules) in exercise of the
powers under Section 49B of the CGST Act vide notification No. 16/2019-Central
Tax, dated 29th March, 2019. In order to ensure uniformity in the
implementation of the provisions of the law, the Board, in exercise of its
powers conferred by section 168 (1) of the CGST Act, hereby clarifies the
issues raised as below.
3. The newly inserted Section 49A of the CGST Act
provides that the input tax credit of Integrated tax has to be utilized
completely before input tax credit of Central tax / State tax can be utilized
for discharge of any tax liability. Further, as per the provisions of section
49 of the CGST Act, credit of Integrated tax has to be utilized first for
payment of Integrated tax, then Central tax and then State tax in that order
mandatorily. This led to a situation, in certain cases, where a taxpayer has to
discharge his tax liability on account of one type of tax (say State tax)
through electronic cash ledger, while the input tax credit on account of other
type of tax (say Central tax) remains un-utilized in electronic credit ledger.
4. The newly inserted rule 88A in the CGST Rules
allows utilization of input tax credit of Integrated tax towards the payment of
Central tax and State tax, or as the case may be, Union territory tax, in any
order subject to the condition that the entire input tax credit on account of
Integrated tax is completely exhausted first before the input tax credit on
account of Central tax or State / Union territory tax can be utilized. It is
clarified that after the insertion of the said rule, the order of utilization
of input tax credit 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) |
5. The
following illustration would further amplify the impact of newly inserted rule
88A of the CGST Rules:
Illustration:
Amount
of Input tax Credit available and output liability under different tax heads
|
Head |
Output
Liability |
Input
tax Credit |
|
Integrated
tax 1000 |
1000 |
1300 |
|
Central
tax |
300 |
200 |
|
State
tax / Union Territory tax |
300 |
200 |
|
Total |
1600 |
1700 |
Option 1:
|
Input
tax Credit on account of |
Discharge
of output liability on account of Integrated tax |
Discharge
of output liability on account of Central tax |
Discharge
of output liability on account of State tax / Union Territory tax |
Balance
of Input Tax Credit |
|
Integrated
tax |
1000 |
200 |
100 |
0 |
|
Input
tax Credit on account of Integrated tax has been completely exhausted |
||||
|
Central
tax |
0 |
100 |
- |
100 |
|
State tax
/ Union territory tax |
0 |
- |
200 |
0 |
|
Total |
1000 |
300 |
300 |
100 |
Option 2:
|
Input
tax Credit on account of |
Discharge
of output liability on account of Integrated tax |
Discharge
of output liability on account of Central tax |
Discharge
of output liability on account of State tax / Union Territory tax |
Balance
of Input Tax Credit |
|
Integrated
tax |
1000 |
200 |
200 |
0 |
|
Input
tax Credit on account of Integrated tax has been completely exhausted |
||||
|
Central
tax |
0 |
200 |
- |
0 |
|
State tax
/ Union territory tax |
0 |
- |
100 |
0 |
|
Total |
1000 |
300 |
300 |
100 |
6. Presently, the common portal supports the order
of utilization of input tax credit in accordance with the provisions before implementation
of the provisions of the CGST (Amendment) Act i.e. pre-insertion of Section 49A
and Section 49B of the CGST Act. Therefore, 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 input tax credit as per the
functionality available on the common portal.
7. It is requested that suitable trade notices may
be issued to publicize the contents of this circular.
8. Difficulty, if any, in the implementation of
this Circular may be brought to the notice of the Board.
F. No. CBEC-20/16/04/2018 - GST