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2019

GST Input Tax Credit Set Off Rules applicable from 01/02/2019

GST Input Tax Credit Set Off Rules applicable from 012F022F2019 

As per CGST Amendment act 2018, the set off rules has been changed. The updated rules are presented with examples as follows:

The criteria for setting off of Input Tax Credit (ITC) has been changed under GST through Central Goods & Services Tax (Amendment) Act 2018, which has been made effective from 1st February 2019.

As per old rules, following was the priority of set-off of ITC was as below:

  • For CGST Output – First set off thru ITC of CGST, then IGST
  • For SGST Output – First set off thru ITC of SGST, then IGST
  • For IGST Output – First set off thru ITC of IGST, then CGST & then SGST

 

As per CGST (Amendment) Act 2018, the priority of set-off of ITC is as below:

  • For CGST Output- First set off thru ITC of IGST, then CGST
  • For SGST Output – First set off thru ITC of IGST, then SGST
  • For IGST Output – First set off thru ITC of IGST, then CGST & then SGST

New Section 49A:

“According to Section 49A notwithstanding anything contained in section 49, 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 towards such payment.
Implication of such provision:

Implication of such provision is that, we have to first utilize input tax credit of IGST, and then use CGST/SGST input tax credit for the balance liability.

As per New Amended CGST Law: The Following sequences are required to be maintained:

IGST Liability CGST Liability SGST Liability
IGST Credit IGST Credit IGST Credit
CGST Credit CGST Credit SGST Credit
SGST Credit

After the insertion of new provision of section 49A it seems that the registered person needs to pay GST in certain situation which was not the case earlier.

Let us understand with example:

Tax Type Liability ITC IGST Credit CGST/SGST Credit GST Payable
IGST 0 100 0 0 0
CGST 200 100 100 100 0
SGST 200 100 0 100 100

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