NEW ITC SET-OFF RULES - Taxsure Consultancy Services

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Thursday, April 4, 2019

NEW ITC SET-OFF RULES

In one of our Edge mailers, we took an example and explained how new ITC set off rules would work. Because GST changes are so many (way too many), every time we talk about a change it helps to take a step back and see what the original rule was. So here goes!
The original set off rules worked this way
Payment forFirst useThen use
SGST taxSGST creditIGST credit
CGST taxCGST creditIGST credit
IGST taxIGST creditCGST credit and SGST credit
The government changed the ITC set off rules and now they work like this (effective 1st April 2019)
Payment forFirst useThen use
IGST taxIGST creditCGST credit and SGST credit
CGST taxIGST creditCGST credit
SGST taxIGST creditSGST credit

However, 2 things are super important here -
  • Firstly, you should fully exhaust IGST credit, before using another type of credit - its mandatory to do so.
  • Secondly, it doesn’t matter to the govt whether you use IGST credit to first pay CGST tax or SGST tax
[For those who want to look at the relevant sections -- section 49A has been newly added, also Rule 88A has been notified].
While this rule is effective 1st April, as on the date of writing this email, the change is not yet implemented on the GST portal. If credit is insufficient, as always you pay by cash.

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