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

Section 53 of the CGST Act, 2017 applies when central tax ITC is utilised to pay integrated tax dues. A person uses Rs 40,000 of CGST credit towards IGST liability, as reflected in a valid return under section 39(1). What follows?

Central tax collected stands reduced by Rs 40,000, and the Central Government transfers Rs 40,000 from the central tax account to the integrated tax account. Section 53 provides this transfer because the CGST credit was used to pay IGST dues, as shown in a valid return.

  1. ACentral tax collected is reduced by Rs 40,000 and the Central Government transfers Rs 40,000 from the central tax account to the integrated tax accountCorrect
  2. BThe Rs 40,000 is transferred from the integrated tax account to the central tax account
  3. CNo transfer takes place because ITC is not cash
  4. DThe State Government transfers Rs 40,000 to the Central Government

Explanation

Section 53 provides that the central tax collected stands reduced by the credit used, and an equal amount is moved from the central tax account to the integrated tax account. The reverse direction is wrong.

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