Share :
Input tax credit utilisation rules under GST

Input Tax Credit (ITC) is credited to a registered person’s electronic credit ledger and the same can be used to pay the output tax liability. The Government vide GST Circular No 98/17/2019 dated 23 April 2019 notified the rules of ITC utilisation for each tax head.

Sequence of ITC utilisation as per amended rules

Sections 49(5), 49A, 49B, rule 88A and Circular No. 98/17/2019 GST dated 23.04.2019 together prescribe the sequence of utilisation of ITC, as given below:-

ITC of IGST to be first utilized towards payment of IGST liability.

  • Remaining IGST credit, if any, can be utilized towards payment of CGST and SGST/UTGST in any order and in any proportion.
  • Entire ITC of IGST should be completely utilized before utilizing the ITC of CGST or SGST/UTGST.

ITC of CGST shall be utilized to pay CGST and then balance will be utilized to pay IGST. CGST credit cannot be utilized for payment of SGST/UTGST.

ITC of SGST shall be utilized to pay SGST and then balance will be utilized to pay IGST. CGST credit cannot be utilized for payment of SGST/UTGST.

Order of ITC Utilisation

 

Restrictions on utilisation of ITC

Rule 86B provides that the taxpayer whose value of taxable supply in a month exceeds Rs 50 lakhs cannot use the amount available in the electronic credit ledger to pay output liability in excess of ninety-nine percent. In simple words, at least 1% of tax dues shall be discharged in cash.

However, the following persons are exempted from this restriction.

(a) A registered person or the proprietor or karta or the managing director or any of its two partners, whole-time Directors, Members of Managing Committee of Associations or Board of Trustees have paid more than one lakh rupees as income tax in the last two financial years in belated Income Tax returns.

(b) A registered person who has received a refund amount of more than one lakh rupees in the preceding financial year on account of unutilised input tax credit under clause (i) of first proviso of sub-section (3) of section 54; or

(c) A registered person who has received a refund amount of more than one lakh rupees in the preceding financial year on account of unutilised input tax credit under clause (ii) of first proviso of sub-section (3) of section 54; or

(d) A registered person who has discharged his liability towards output tax through the electronic cash ledger for an amount which is in excess of 1% of the total output tax liability, applied cumulatively, upto the said month in the current financial year.

(e) Government Department, Public Sector Undertaking, local authority, statutory body.

Blocking of ITC

Rule 86A empowers the Commissioner or an authorized officer (not below the rank of an Assistant Commissioner) to block the utilization of ITC available in the electronic credit ledger if he has reasons to believe that such ITC has been fraudulently availed or is ineligible.

The ITC can be blocked in the following circumstances:

(i) ITC has been availed on the basis of tax invoices/valid documents -

  • issued by a non-existent supplier or by a person not conducting any business from the registered place of business; or
  • without receipt of goods or services or both; or
  • the tax in relation to which has not been paid to the Government

(ii) the registered person availing ITC has been found non-existent or not to be conducting any business from the registered place of business; or

(iii) the registered person availing ITC is not in possession of tax invoice/valid document.


Share :
TaxGyata Team

TaxGyata Team