Provisions relating to ITC Set-Off

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Provisions relating to ITC Set-Off.

This Article provide detail understanding of ITC Set-Off in Old Provision & New Provision.

OLD PROVISIONS:-

Section 49(5):-
The amount of input tax credit available in the electronic credit ledger of the registered person on account of,

(a) integrated tax shall first be utilised towards payment of integrated tax and the amount remaining, if any, may be utilised towards the payment of central tax and State tax, or as the case may be, Union territory tax, in that order.

(b) The central tax shall first be utilised towards payment of central tax and the amount remaining, if any, may be utilised towards the payment of integrated tax.

(c) The State tax shall first be utilised towards payment of State tax and the amount remaining, if any, may be utilised towards payment of integrated tax.

(d) The Union territory tax shall first be utilised towards payment of Union territory tax and the amount remaining, if any, may be utilised towards payment of integrated tax.

(e) The central tax shall not be utilised towards payment of State tax or Union territory tax; and

(f) The State tax or Union territory tax shall not be utilised towards payment of central tax.



Input tax
Credit on
account of
Output liability
on account of
Integrated tax
Output liability
on account of
Central tax
Output liability on account
of State tax / Union
Territory tax
Integrated tax
(I)
(IV)
(V)
Central tax
(VI)
(II)
 Not permitted
State tax / Union
Territory tax
(VII)
 Not permitted
(III)





NEW PROVISIONS:-

Section 49(5):-
The amount of input tax credit available in the electronic credit ledger of the registered person on account of,

(a) Integrated tax shall first be utilised towards payment of integrated tax and the amount remaining, if any, may be utilised towards the payment of central tax and State tax, or as the case may be, Union territory tax, in any order. ("In any order" Inserted by Notification No. 16/12019 CT Dt. 29.03.2019)

(b) The central tax shall first be utilised towards payment of central tax and the amount remaining, if any, may be utilised towards the payment of integrated tax.

(c) The State tax shall first be utilised towards payment of State tax and the amount remaining, if any, may be utilised towards payment of integrated tax.
            “Provided that the input tax credit on account of State tax shall be utilised towards payment of integrated tax only where the balance of the input tax credit on account of central tax is not available for payment of integrated tax" (Inserted by CGST Amendment Act, 2018 Dt. 29.08.2018 but applicable from 01.02.2019)

(d) The Union territory tax shall first be utilised towards payment of Union territory tax and the amount remaining, if any, may be utilised towards payment of integrated tax.
            “Provided that the input tax credit on account of Union territory tax shall be utilised towards payment of integrated tax only where the balance of the input tax credit on account of central tax is not available for payment of integrated tax" (Inserted by CGST Amendment Act, 2018 Dt. 29.08.2018 but applicable from 01.02.2019)

(e) The central tax shall not be utilised towards payment of State tax or Union territory tax; and

(f) The State tax or Union territory tax shall not be utilised towards payment of central tax.


Section 49A:- (Inserted by CGST Amendment Act, 2018 Dt. 29.08.2018 but applicable from 01.02.2019)
Notwithstanding anything contained in section 49, the input tax credit on account of central tax, State tax or Union territory tax shall be utilised 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 utilised fully towards such payment.

Section 49B:- (Inserted by CGST Amendment Act, 2018 Dt. 29.08.2018 but applicable from 01.02.2019)
Notwithstanding anything contained in this Chapter and subject to the provisions of clause (e) and clause (f) of sub-section (5) of section 49, the Government may, on the recommendations of the Council, prescribe the order and manner of utilisation of the input tax credit on account of integrated tax, central tax, State tax or Union territory tax, as the case may be, towards payment of any such tax.

Rule 88A Order of utilization of input tax credit (Inserted by Notification No. 16/12019 CT Dt. 29.03.2019):-

            Input tax credit on account of integrated tax shall first be utilised towards payment of integrated tax, and the amount remaining, if any, may be utilised towards the payment of central tax and State tax or Union territory tax, as the case may be, in any order.

            Provided that the input tax credit on account of central tax, State tax or Union territory tax shall be utilised 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 utilised fully.

Input tax
Credit on
account of
Output liability
on account of
Integrated tax
Output liability
on account of
Central tax
Output liability on account
of State tax / Union
Territory tax
Integrated tax
(I)
(II) – In any order and in any proportion
(III) Input tax Credit on account of Integrated tax to be completely exhausted mandatorily
Central tax
(V)
(IV)
Not permitted
State tax / Union
Territory tax
(VII)
Not permitted
(VI)



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