Order of Utilisation of Input tax credit

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Input Tax Credit (“ITC”) is a fundamental concept of Goods and Service Tax (“GST”). GST is levied in 3 forms viz. Integrated Goods and Service Tax (“IGST”), Central Goods and Service Tax (“CGST”) and State/Union Territories Goods and Service Tax (“SGST/UTGST”).

GST portal maintains separate ITC accounts for all such forms of GST, i.e., GST input on account of IGST gets credited into ITC ledger of IGST. Similar process is applicable for CGST & SGST/UTGST also. As separate accounts are maintained for all type of GST, it is pertinent to get clarity about order and manner of utilisation of ITC.

Section 49 of Central Goods and Service Tax Act, 2017 (“CGST Act”) deals with order of utilisation of ITC. However, Central Goods and Services Tax (Amendment) Act, 2018 [“CGST (Amendment) Act”] amended the provisions of Section 49 and also inserted Section 49A and 49B thereafter. Further, Rule 88A also got inserted in Central Goods and Service Tax Rules, 2017 (“CGST Rules”) vide power conferred u/s 49B of CGST Act.

Post such amendments various representations were received from industry regarding accumulation of ITC for one kind of tax (to say SGST) in ITC ledger and discharge of liability for other kind of tax (to say CGST) through cash. Accordingly to provide clarity on manner of utilisation of ITC, Central board of Indirect Taxes and Customs (“CBIC”) has issued circular 98/17/2019 dated 23rd April, 2019.

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