Order of utilization of input Tax Credit

New GST Rule 88A as per Notification no 16/2019 dated: 29th March 2019 has said restore the set of Input Tax Credit utilization in the old method with minor modification in order of set off.

Rule 88A: Order of Utilization of input tax credit –

Input tax credit on account of integrated tax shall be

• 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.

In the above explanation, in any order means

• IGST input tax credit after adjusting with IGST output liability ,
• Remaining balance of IGST input tax credit can be set off with any head of tax liability (CGST / UTGST or STGST) in any order.

In second proviso,

It is mentioned that input tax credit available on account of integrated tax need to be

• First utilized fully.
• After that only credit available on account of central tax, State tax or Union territory tax can be utilized.

The second proviso to section 16(2) of the CGST Act, 2017 says,

• that ifa recipient fails to pay to the supplier of goods or services or both, other than the supplies on which tax is payable on reverse charge basis,
•  the amount towards the value of supply along with tax payable thereon within a period of 180 days from the date of issue of invoice by the supplier,
• an amount equal to the input tax credit availed by the recipient shall be added to his output tax liability,
•  along with interest thereon,
  • In such manner as may be prescribed.

The third proviso,

•  in the same section says that the recipient shall be entitled to avail of the credit of input tax
• On payment made by him of the amount towards the value of supply of goods or services or both along with tax payable thereon.
• So, you lose the credit if you don’t pay within 180 days,
  • But can take the credit if you pay later.
  •  However, interest is a loss that you cannot get back.