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CMA Intermediate · Direct and Indirect Taxation · Input Tax Credit

An ISD located in Maharashtra has Rs 90,000 of eligible integrated tax credit and Rs 40,000 of eligible central tax credit (with Rs 40,000 of State tax credit) to distribute for services attributable to a recipient located in Karnataka. How will the credit be distributed to the Karnataka recipient, assuming it is the only recipient and gets all credit?

The recipient receives Rs 90,000 of integrated tax credit plus Rs 80,000 more as integrated tax. Rule 39(1)(j)(ii) says central and State tax credit for a recipient in another State is distributed as integrated tax equal to their aggregate.

  1. AIGST credit Rs 90,000 as integrated tax; central and State tax credits of Rs 80,000 as integrated taxCorrect
  2. BIGST credit Rs 90,000 as integrated tax; Rs 40,000 as central tax and Rs 40,000 as State tax
  3. CRs 1,70,000 as central tax only
  4. DRs 90,000 as integrated tax; Rs 40,000 as central tax only, State tax credit lapses

Explanation

Rule 39(1)(i) requires integrated tax credit to be distributed as integrated tax to every recipient. Under clause (j)(ii), central and State tax credit for a recipient in a different State is distributed as integrated tax equal to the aggregate of the two, here Rs 40,000 + Rs 40,000 = Rs 80,000. Distributing them as CGST and SGST is only for a recipient in the ISD's own State.

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