[ratings]
Old Provisions:
Section 49(5) of the ACT provided the order and manner of utilization of various ITC a following:
What is covered here
| Liability | ITC Utilization Order | Note | |
| 1st | 2nd | ||
| IGST | IGST | CGST or SGST | CGST first or SGST first, own choice |
| CGST | CGST | IGST | |
| SGST | SGST | IGST | |
There was no specific provision on the sequence of ITC Utilization i.e. Which ITC (IGST, CGST or SGST) to be utilized firstly, secondly and thirdly in sequence or order.
But RPs utilize the ITC in the following order:
| IGST ITC | first set off with | IGST Liability |
| CGST ITC | first set off with | CGST Liability |
| SGST ITC | first set off with | SGST Liability |
Balance IGST ITC first with remaining CGST Liability and then with remaining SGST liability. Balance CGST ITC or SGST ITC with IGST liability (in any order).
New Provisions w.e.f. Feb,1 2019:
Following amendments were made in utilization and set off of ITC
- In section 49(5) proviso inserted to provide that SGST ITC shall not be utilized towards IGST liability till CGST ITC is available i.e. CGST ITC shall be utilized first with IGST liability and then SGST ITC shall be utilized.
- Section 49A inserted to provide that IGST ITC shall be first utilized amongst all ITCs.
Crux:-
| Liability | ITC Utilization Order | Amendment | ||
| 1st | 2nd | 3rd | ||
| IGST | IGST | CGST | SGST | A new proviso to section 49(5) |
| CGST | IGST | CGST | due to New Section 49A | |
| SGST | IGST | SGST | due to New Section 49A | |
Let’s understand it with Examples and compare new and old scenarios:
| Case | Scenario | Impact of Amendment | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 1 | The supplier is making Local Sale and Local Purchase only and thus no IGST transaction | Since there is no IGST ITC and IGST liability the changes will have no impact on final liability. Hence no Impact. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2 | The supplier is engaged in making all IGST Purchases and all Local Sales. | Since there is no order in a change in order to utilize IGST hence there is no impact in this case. Hence no impact. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 3 | The supplier is engaged in making all Local Purchases and all IGST Sales | Here the supplier is required to firstly adjust CGST ITC and then SGST ITC against IGST liability. Previously this order was not prescribed and thus before 1st Feb 2019 supplier could utilize any of the ITC firstly. However, it otherwise will have little impact as both the ITC must be of equal amounts and even if of unequal amounts due to transition credit u/s 140 still there is no impact as both the ITC can be utilized fully but in the given order. Hence no impact. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 4 | The supplier is engaged in making all Local Purchases and Local Sales and IGST Sales. | Here the supplier is required to adjust CGST ITC against CGST liability and SGST ITC against SGST liability. Thereafter remaining CGST ITC shall be first utilized to pay IGST liability and then SGCT ITC shall be utilized to pay IGST liability. Previously this order was not prescribed and thus before 1stFeb 2019 supplier could utilise any of the ITC firstly. Whereas if there is CGST credit unutilized as on 1st Feb 2019 due to transition credit the SGST ITC may not be fully utilized. However, there shall not be any liability due to changes in utilization. Hence no impact. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 5 | The supplier is engaged in making all IGST Purchases and Local Sales and IGSTSales. | Here IGST ITC shall be available against IGST liability, CGST liability and SGST liability with no change in the order of utilization and set off of ITC. Hence no impact. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 6 | The supplier is engaged in making local as well as IGST purchase and all local sale | Here the supplier is having all types of ITCs i.e. IGST, CGST and SGST and liability of CGST and SGST. Previously firstly CGST ITC was utilized towards CGST liability and SGST was utilised towards SGST liability and thereafter IGST ITC was utilized towards remaining CGST and SGST liability. But the order has been changed w.e.f. 1st Feb 2019. Now firstly IGST ITC shall be utilized fully towards CGST liability and SGST liability in that order (i.e. first towards CGST and then towards SGST). After exhausting of IGST ITC the CGST ITC shall be utilised against CGST liability and SGST ITC shall be utilized against SGST liability. Due to this change in the order of utilization, it has an impact of net payable tax liability along with unutilized GST ITC as explained through a table, given below- | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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| 7 | The supplier is engaged in making local and IGST purchase and also local sale and IGST sale. | Here supplier has all types of ITCs and liabilities i.e. IGST, CGST, and SGST. Previously all ITCs were firstly utilized towards the same levy and thereafter the ITC of IGST was utilized towards CGST and SGST in that order or CGST or SGST ITC were utilized towards IGST liability in the order of supplier choice. However after amendment firstly IGST ITC is to be utilized fully towards IGST, CGST and SGST liabilities in that order and thereafter CGST ITC to utilized and lastly SGST Credit to be utilized against IGSt liability. It impacts the variant of ITC which is explained through below comparative tables | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Disclaimer: Due care has been taken to draft this write-up and is intended to express the Authors understanding and to start an academic discussion on the subject discussed in above write-up. it should not be considered as professional advice. Readers are advised to refer to relevant provisions of law before applying any of the above-mentioned views. The author accepts no responsibility whatsoever and will not be liable for any losses, claims or damages which may arise because of the content of this write-up.
[ratings]