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CMA Final · Indirect Tax Laws and Practice · Input Tax Credit

An ISD located in Maharashtra has CGST credit of Rs 90,000 and SGST credit of Rs 90,000 on an input service attributable to a recipient unit in Karnataka alone. How is the credit distributed to the Karnataka unit?

The Karnataka unit receives integrated tax credit of Rs 1,80,000. For a recipient in a different State from the ISD, CGST and SGST credit is distributed as integrated tax equal to the aggregate of the two, so 90,000 plus 90,000 is passed on.

  1. ACGST Rs 90,000 and SGST Rs 90,000 as CGST and SGST
  2. BIntegrated tax of Rs 1,80,000Correct
  3. CIntegrated tax of Rs 90,000 only
  4. DCGST Rs 90,000 only, as SGST is lost

Explanation

For a recipient located in a State other than that of the ISD, central tax and State tax credit is distributed as integrated tax. The amount equals the aggregate of the CGST and SGST credit qualifying for that recipient: 90,000 + 90,000 = Rs 1,80,000. Distributing as CGST and SGST applies only to recipients in the ISD's own State.

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