ITC Utilisation Pattern/Order Amended w.e.f. 1 February 2019 2


Section 49(5) of CGST Act, 2017 prescribes the pattern of utilisation of eligible Input Tax Credit (ITC) for payment of tax under different heads of GST i.e. CGST, SGST, UTGST, and IGST. ITC Utilisation pattern has very crucial role in fund planning.

CGST Amendment Act, 2018 has amended the pattern/order of utilisation of such ITC for payment of taxes and is applicable with effect from 1st February 2019. 

In this article, we will discuss such pattern as amended till date to be applicable w.e.f. 1st February 2019.

 

ITC available
under Tax Head
Utilisation pattern
(i.e. for payment of
Tax)
IGST First : IGST
2nd Pref: CGST/SGST/UTGST, any order
(IGST can be used for SGST before settlement against CGST)
   
CGST First : CGST
2nd : IGST
   
SGST First : SGST
2nd : IGST

ITC of SGST can be used for payment of IGST only when ITC of CGST completely exhausted.
   
UTGST First : UTGST
2nd : IGST

ITC of UTGST can be used for payment of IGST only when ITC of CGST completely exhausted.

Along with this, CGST Amendment Act, 2018 also specify another pattern for preference of utilisation of ITC of particular head out of all tax heads for payment of particular head of tax. Section 49A has been inserted for this and is reproduced as follows:-

49A “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.”

Simplified provisions are tabled as below.

TAX Payable under
GST Head
ITC Utilisation Order
IGST First – ITC of IGST
2nd – ITC of CGST
3rd – ITC of SGST/UTGST
   
CGST First – ITC of IGST
2nd – ITC of CGST
   
SGST/UTGST First – ITC of IGST
2nd – ITC of SGST/UTGST

Before such amendment, there was certain chances for planning to avoid payment of tax in cash by utilising any credit without any pattern. However, after amendment, it will definitely impact fund planning where ITC under least importance head could only be carry forward for next ‘tax period’.


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