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CS Professional · Goods and Services Tax (GST) and Corporate Tax Planning · Input Tax Credit and Computation of GST Liability

A registered person holds input tax credit of integrated tax, central tax and State tax in the electronic credit ledger. Under section 49A of the CGST Act, 2017, which statement correctly describes how the central tax and State tax credit may be utilised towards payment of tax?

Under section 49A, credit of central, State or Union territory tax can be used for paying tax only after the integrated tax credit has first been fully utilised for that payment. Integrated tax credit therefore has to be exhausted first, and the taxpayer has no choice in the matter.

  1. ACentral tax credit and State tax credit may be utilised only after the integrated tax credit has first been utilised fully towards such paymentCorrect
  2. BCentral tax credit may be utilised before integrated tax credit if the taxpayer so chooses
  3. CState tax credit must be utilised first, followed by integrated tax credit
  4. DIntegrated tax credit may be utilised only after central tax credit is exhausted

Explanation

Section 49A says that credit of central tax, State tax or Union territory tax is to be used only after the integrated tax credit has first been utilised fully. A taxpayer therefore cannot choose to use central tax credit first. The option reversing the sequence contradicts the text.

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