Applicability criteria for GSTR 9,9A, 9B & 9C for FY 2018-19 (click on image to large view)

Analysis of Provisions related to order of Utilization of Input Tax Credit

Analysis of Provisions related to order of Utilization of Input Tax Credit

Overview	As per sub section (4) of section 49 of CGST Act,2017 “The amount available in the electronic credit ledger may be used for making any payment towards output tax under this Act or under the Integrated Goods and Services Tax Act in such manner and subject to such conditions and within such time as prescribed in sub rule (3) of rule 85 of the CGST Rules, 2017
Sub rule (3) of rule 85 of the CGST Rules, 2017	Subject to the provisions of section 49, section 49A and section 49B, payment of every liability by a registered person as per his return shall be made by debiting the electronic credit ledger maintained as per rule 86 or the electronic cash ledger maintained as per rule 87 and the electronic liability register shall be credited accordingly.
Sub section (5) of section 49	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 utilized towards payment of integrated tax and the amount remaining, if any, may be utilized 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 utilized towards payment of central tax and the amount remaining, if any, may be utilized towards the payment of integrated tax; c)    the State tax shall first be utilized towards payment of State tax and the amount remaining, if any, may be utilized towards payment of integrated tax: [Provided that the input tax credit on account of State tax shall be utilized 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 the Central Goods and Services Tax (Amendment) Act, 2018, w.e.f. 1-2-2019.] d)    the Union territory tax shall first be utilized towards payment of Union territory tax and the amount remaining, if any, may be utilized towards payment of integrated tax: [Provided that the input tax credit on account of Union territory tax shall be utilized 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 the Central Goods and Services Tax (Amendment) Act, 2018, w.e.f. 1-2-2019.] e)    the central tax shall not be utilized towards payment of State tax or Union territory tax; and f)     the State tax or Union territory tax shall not be utilized towards payment of central tax.
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. [ Inserted by the Central Goods and Services Tax (Amendment) Act, 2018, w.e.f. 1-2-2019]
Section 49B	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 utilization 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 prescribed in this regard Rule 88A. Input tax credit on account of integrated tax shall first be utilized towards payment of integrated tax, and the amount remaining, if any, may be utilized 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 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. [Rule 88A Inserted by Central Goods and Services Tax (Second Amendment) Rules, 2019, w.e.f. 1-4-2019.]

          Summary of above discussed provisions

          Order of Utilization of ITC

IGST INPUT	-      First it has to be utilized towards IGST output liability -      Any leftover IGST ITC to be utilized towards CGST or SGST/UGST output liability as per choice (i.e. either first utilized towards CGST and then SGST or first utilized towards SGST and then CGST or in any proportion basis for example 50% towards CGST and 50% towards SGST etc.)
CGST INPUT	-      IGST ITC has be fully exhaust before utilizing CGST ITC. -      First it has to be utilized towards CGST output liability -      Any leftover CGST ITC to be utilized towards IGST output liability -      CGST ITC can’t be utilized towards SGST/UGST output liability
SGST INPUT	-      IGST ITC has be fully exhaust before utilizing SGST ITC. -      First it has to be utilized towards SGST output liability -      Any leftover SGST ITC to be utilized towards IGST output liability -      SGST ITC can’t be utilized towards CGST/UGST output liability Utilization provision is same for UGST is same as SGST.