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CS Executive · Tax Laws and Practice · Input Tax Credit and Computation of GST Liability

A registered person in Pune has SGST credit of Rs 40,000 and CGST credit of Rs 10,000 in the credit ledger and no IGST credit. Its IGST output liability is Rs 30,000. Which utilisation is correct under section 49(5)?

CGST credit of Rs 10,000 is used first, and SGST credit of Rs 20,000 pays the rest of the IGST. The proviso to section 49(5)(c) allows SGST credit to be used for IGST only after the CGST credit balance is exhausted.

  1. ACGST Rs 10,000 first, then SGST Rs 20,000, with Rs 20,000 SGST credit leftCorrect
  2. BSGST Rs 30,000 and CGST nil, leaving CGST credit of Rs 10,000
  3. CSGST Rs 15,000 and CGST Rs 15,000 in equal proportion
  4. DCGST Rs 10,000 and the balance Rs 20,000 paid in cash

Explanation

The proviso says SGST credit can be used for IGST only when CGST credit balance is not available for IGST. So CGST Rs 10,000 is exhausted first, and SGST pays the remaining Rs 20,000. SGST credit left is Rs 20,000. Paying cash is unnecessary as credit suffices.

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