GST Input Tax Credit Setting off Rules changed from 1st February 2019

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GST Input Tax Credit Setting off Rules changed from 1st February 2019

The government has amended CGST Act 2017 vide CGST Amendment Act 2018 with various changes w.e.f 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:

GST Input Tax Credit Setting off Rules changed from 1st February 2019

Legal Text

Section 49A has been inserted by Section 21 of CGST Amendment Act 2018

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 21 of CGST Amendment Act 2018 has been presented below for reference

Subsection 5 of Section 49 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 can be set off against CGST and then against IGST, and SGST can be set off against SGST and then against IGST.

Section 49A Over Rules complete Section 49

Section 49(5) of CGST Amendment Act 2017 has been presented below for reference

Impact of amendment

Government has changed the order of setoff by introducing section 49A w.e.f 1st February 2019 and now IGST Credit should be set off fully before taking setting of CGST or SGST Credit.

This has been Explained with a small Example


GST Input Tax Credit Setting off Rules changed from 1st February 2019

GST Input Tax Credit Setting off Rules changed from 1st February 2019

Conclusion

As per the Existing set of Provisions following Set-off Rules were applicable.

Payment ForSet-Off-1Set-Off-2
IGSTIGSTCGST & SGST
CGSTCGSTIGST
SGSTSGSTIGST

As per New Set of Provisions applicable with effect from 1st February 2019 below mentioned set-off rules are applicable.

Payment ForSet-Off-1Set-Off-2
IGSTIGSTCGST & SGST
CGSTIGSTCGST
SGSTIGSTSGST

Disclaimer: The entire contents of this document have been prepared on the basis of relevant provisions and as per the information existing at the time of the preparation. Although care has been taken to ensure the accuracy, completeness and reliability of the information provided, I assume no responsibility therefore. Users of this information are expected to refer to the relevant existing provisions of applicable Laws. The user of the information agrees that the information is not a professional advice and is subject to change without notice. I assume no responsibility for the consequences of use of such information. In no event shall I shall be liable for any direct, indirect, special or incidental damage resulting from, arising out of or in connection with the use of the information.

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18 Comments

  1. 1

    This is bizarre.
    It will paper the trade and industry badly and ultimately will derail the GST.
    Who will make interstate purchases now until and unless he has interstate sales.
    This is simply ridiculous

  2. 2

    Dear Pratibha Goyal

    IGST can set off with SGST Also.

    As per Previous Rule
    IGST – IGST (1st set off ) – CGST & SGST (2nd Set off)
    As per New Provision
    IGST – IGST (1st Set off) – CGST & SGST (2nd Set off)
    Pls. correct your summery

  3. 4

    Is this new rule applicable for GST Liability for the month of January 2019 which is actually payable in February 2019.

  4. 10
  5. 11
  6. 12

    Kindly advise under what situation can the ITC available be different under CGST and SGST. I think the sample data in your example is incorrect as both CGST and SGST ITC have to be equal amounts and then the working will change.

    • 13

      Sir as per my understanding the Example is correct.

      CGST and SGST Credit may be of different amount. I have seen that practically as well. Indeed the situation will change with Different figures of ITC

  7. 14

    So this will badly affect the cash flows and derail the basic idea behind gst
    Hasn’t chambers and industry body have given there reservations against this

  8. 15

    IF YOUR
    IGST CGST SGST
    PAY 25000 35000 35000
    REC 50000 25000 25000

    AS PER NEW RULE
    IGST CGST SGST
    IGST 25000
    CGST 25000 10000 15000 CR
    SGST 0 0 25000 10000 CASH
    SO THE BASIC OF THIS RULE IS CLOSE YOUR BUSSINESS AND JUST PAY GOVT ALL OF YOUR AMOUNT

  9. 16
  10. 17
    • 18

      It will be applicable from Feb month calculation,depends on how portal accepts in th efigure in new concept or the old concept

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