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

Under the CGST Act, 2017, a registered person holds input tax credit in his electronic credit ledger on account of integrated tax. In what order must this IGST credit be utilised?

Integrated tax credit must first be used to pay integrated tax. Any remaining balance may then be used for central tax and, after that, State or Union territory tax, in that sequence. The law fixes this order, so the taxpayer cannot choose it.

  1. AFirst towards central tax, then State tax, then integrated tax
  2. BFirst towards integrated tax, then the balance towards central tax and then State or Union territory taxCorrect
  3. CFirst towards State tax, then central tax, then integrated tax
  4. DIn any order the registered person chooses among the three taxes

Explanation

Section 49(5)(a) requires IGST credit to be used first for integrated tax. Any balance goes to central tax and then to State or Union territory tax, in that order. Choosing the order freely, or starting with CGST, is not permitted.

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