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CMA Intermediate · Direct and Indirect Taxation · Returns and Payment of Taxes

Which statement about utilisation of electronic credit ledger balances under section 49(5) of the CGST Act is correct?

State tax credit may be used towards integrated tax only when the balance of central tax credit is not available for paying integrated tax. Central credit cannot pay State tax, State credit cannot pay central tax, and IGST credit can also pay CGST and SGST after IGST.

  1. ACentral tax credit may be used to pay State tax if the State tax credit is insufficient
  2. BState tax credit may be used for central tax after integrated tax credit is exhausted
  3. CState tax credit may be used towards integrated tax only where the balance of central tax credit is not available for that purposeCorrect
  4. DIntegrated tax credit can be used only for payment of integrated tax

Explanation

The proviso to section 49(5)(c) allows State tax credit to pay integrated tax only where central tax credit balance is not available for it. Central tax cannot pay State tax, and State tax cannot pay central tax, under clauses (e) and (f). IGST credit can also pay central and State tax after IGST.

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