Change in input credit set off rules w.e.f 01.02.2019

The 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 after the section 49, which is as under:


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 utilized 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 utilized fully towards such payment


Section 49 (5) of CGST Act 2017 speaks about manner of utilising Input Tax Credit (ITC) for payment of GST output Tax liability, e.g IGST can be Set off against IGST and then CGST and SGST, CGST cane be set off against CGST and then against IGST, and SGST can be set off against SGST and then against IGST.


Impact of amendment:


But now Government has changed the order of setoff by introducing section 49A w.e.f and now IGST Credit should 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 1st utilised fully for payment of IGST then for CGST and then for SGST liability as the case may be, even before utilisation of ITC of CGST or SGST.


For e.g.


Say supplier for February 2019 has following data for filing GST 3B


Output tax liability

IGST- Rs 200

CGST-Rs 200

SGST- Rs 200

Total- Rs 600


ITC Available

IGST- Rs 300

CGST-Rs 200

SGST- Rs 100

Total- Rs 600


Before 01.02.2019 set off was as under:


NO TAX IS TO BE PAYABLE


IGST liability of Rs 200 set off from IGST ITC

CGST liability of Rs 200 set off from CGST ITC

SGST liability of Rs 200 set off from remaining IGST ITC of Rs 100 and SGST ITC of Rs 100


After 01.02.2019 (Section 49A) set off was as under:


Supplier need to Pay Rs 100 from its pocket despite of having ITC available


IGST liability of Rs 200 set off from IGST ITC

CGST liability of Rs 200 set off from remaining IGST ITC of Rs 100 and CGST ITC of Rs 100

SGST liability of Rs 200 set off from SGST ITC of Rs 100 and rest liability of Rs 100 will be paid in cash


Note:

IGST credit 1st used against IGST, and also IGST 1st need to be set off against CGST and then only CGST credit can be set off against CGST, by amending the section 49A supplier need to pay Tax of Rs 100 from his pocket.

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