Changes in CGST setoff rules w.e.f. February 01, 2019

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  • 2 Mar 2019
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Changes in CGST setoff rules w.e.f. February 01, 2019
2 Mar

The taxpayers need to pay GST from Bank even if they have ITC balance from 01.02.2019, Government Amended CGST Act.

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:

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 can 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 the 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 GST 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:-

The Suppliers need to Pay Rs 100 from its pocket despite 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 firstly used against IGST, and also IGST firstly 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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