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

Under the CGST Act, 2017, as regards utilisation of input tax credit (ITC) on account of central tax, State tax or Union territory tax towards payment of any GST, which condition applies?

ITC of central, State or Union territory tax can be used towards payment of any GST only after the available integrated tax ITC has first been fully utilised for that payment. Integrated tax credit must be exhausted first, as Section 49A requires.

  1. AIt can be used only after the ITC of integrated tax has first been utilised fully towards such paymentCorrect
  2. BIt can be used before any ITC of integrated tax is touched
  3. CIt can be used only for paying central tax and never for integrated tax
  4. DIt can be used only after being converted into cash through a refund

Explanation

Section 49A provides that ITC of central, State or UT tax is utilised only after the ITC of integrated tax has first been fully utilised towards the payment. Allowing CGST/SGST credit first reverses this mandatory sequence, so it is wrong.

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