GST INDIA DAILY
Your one stop shop for all news and updates on Goods and Services Tax
Your one stop shop for all news and updates on Goods and Services Tax
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Last week we have gone through areas where ITC in ineligible. Read the Part 7 of ITC under GST. Please go through the link below
https://gstindiadaily.wordpress.com/2020/09/07/1-7-input-tax-credit-under-gst-act/
A person who is registered as a taxable person shall be eligible to take credit of input tax admissible to him and the said amount shall be credited to the electronic credit ledger of such person. Such credit shall be utilized only for payment for self-assessed output tax liability.
Electronic credit ledger is the input tax credit ledger in electronic form maintained at the common portal for each registered taxable person. Mr Raju sells goods to Mr Biju and issues supply invoice. Mr Raju files GSTR 1 with all the details of Mr Biju.
Information from GSTR 1 gets transmitted to GSTR 2A of Mr Biju. The amount of tax paid on purchases gets credited to Electronic Credit Ledger of Mr Biju and he can use the credit received to pay his output tax liability. The input tax credit can be availed after satisfying the conditions to avail ITC.
HOW CAN INPUT TAX CREDIT BE UTILIZED?
INPUT TAX CREDIT OF IGST?
ITC lying in IGST shall be utilised toward payment of following taxes in this order only
ITC on account of IGST should be first utilised toward IGST and amount remains, if any, should be utilised for CGST & SGST/UTGST respectively.
ITC on account of CGST & SGST/UTGST shall be utilised only after the ITC available on account of IGST has first been utilised fully towards such payment.
INPUT TAX CREDIT OF CGST?
ITC lying in CGST shall be utilised toward payment of output liability in following order only
ITC lying in CGST account shall not be utilised towards payment of SGST/UTGST output liability.
ITC on account of CGST shall be utilised only after the ITC available on account of IGST has first been utilised fully towards such payment.
INPUT TAX CREDIT OF SGST?
ITC lying in SGST/UTGST shall be utilised toward payment of output liability in following order only
ITC on account of SGST/UTGST shall be utilised only after the ITC available on account of IGST has first been utilised fully towards such payment.
ITC on account of SGST/UTGST shall be utilised towards payment of IGST only where the balance of the ITC on account of CGST is not available for payment of IGST.
ITC of SGST/UTGST Shall not be utilised for payment of CGST liability.
Order and manner of utilisation of ITC is presented in a tabular form below
| Output Liability | First Set Off with | Next Set Off with | Not Allowed to Set off with |
| IGST | IGST | CGST/SGST/UTGST | |
| CGST | CGST | IGST | SGST/UTGST |
| SGST | SGST | IGST | CGST |
| UTGST | UTSGT | IGST | CGST |
GST INDIA DAILY
Let us understand the ITC utilisation concept with an example:
| PARTICULARS | IGST | CGST | SGST |
| OUTPUT TAX PAYABLE | 25,000 | 50,000 | 50,000 |
| INPUT TAX CREDIT AVAIABLE | 30,000 | 12,000 | 12,000 |
GST INDIA DAILY
| PARTICULARS | IGST | CGST | SGST |
| OUTPUT TAX PAYABLE | 25,000 | 50,000 | 50,000 |
| Less : IGST ITC | 25,000 | 2,500 | 2,500 |
| Less : CGST ITC | – | 12,000 | – |
| Less : SGST ITC | – | – | 12,000 |
| CASH PAYMENT | – | 35,500 | 35,500 |
GST INDIA DAILY
In the given example ITC of IGST Rs. 30,000 has been first utilised for IGST liability of Rs. 25,000 and balance of Rs. 5,000 utilised for the liability of CGST & SGST in equal proportion as per our convenience.
Alternatively, Balance of Rs. 5,000 can be utilise fully for CGST also, as shown below
| PARTICULARS | IGST | CGST | SGST |
| OUTPUT TAX PAYABLE | 25,000 | 50,000 | 50,000 |
| Less : IGST ITC | 25,000 | 5,000 | – |
| Less : CGST ITC | – | 12,000 | – |
| Less : SGST ITC | – | – | 12,000 |
| CASH PAYMENT | – | 33,000 | 38,000 |
GST INDIA DAILY
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