IGST credit to settle against central and state tax dues

Dear members,
Good day!   

Circular: M&C/07/05/19-TPCI

     This is to inform you about the clarification on the IGST credit, the Central Board of Indirect Taxes and Customs (CBIC), has made it clear that; now the businesses that have accumulated Integrated GST (IGST) credit in their books can settle it against central and state tax dues in any proportion.

2.     Importers typically pay IGST on goods they bring into the country. Also IGST is paid on inter-state movement of goods. This tax is supposed to be set-off against the actual GST paid, or may be claimed as refund in certain cases.

3.     The CBIC had allowed utilisation of input tax credit (ITC) of IGST towards the payment of Central GST and State GST, in any order subject to the condition that the entire IGST liability has been first discharged using the accumulated credit.

4.     The CBIC has now clarified that the IGST credit can be used in payment of CGST or SGST in any order or proportion.

5.     Under Goods and Services Tax (GST), the tax levied on consumption of goods or rendering of service is split 50:50 between the centre (CGST) and the state (SGST).

6.     On inter-state movement of goods as well as imports, an IGST is levied, which accrues to the centre.

7.     Ideally, there should be ‘nil’ balance in the IGST pool at the end of a fiscal since the amount should be used for payment of CGST and SGST. As some businesses are ineligible to claim the benefits of input tax credit (ITC), the balance gets accumulated in the IGST pool.

8.     This clarification from government would help businesses and taxpayers to swim out of the gap created between legal framework and GST network, now taxpayers can continue to work according to the functionality of GSTN without worrying for any legal consequences.

9.     This was a much needed clarification as this should help bring to rest the varied interpretation apprehended by industry on the utilisation of IGST credit.

 

Hope this clarification will help all business entities in India.