READING DOWN MODEL IGST ACT (PART-9)(INPUT TAX CREDIT)

[Dr. Sanjiv Agarwal]

Chapter VI of Model IGST Act provides for claim of input credit and its provisional acceptance, matching, reversal and reclaim (section 8); and transfer of input tax credit (section 9)

Manner of utilization of input tax credit is provided in section 7 of the Model IGST Act (Refer part 8 of this series).

Claim of Credit

Every registered taxable person shall, subject to such conditions and restrictions as may be prescribed in this behalf, be entitled to take credit of input tax, as self-assessed, in his return and such amount shall be credited, on a provisional basis, to his electronic credit ledger to be maintained in the manner as may be prescribed.

It is proposed that such credit of input tax would be done electronically in the manner which will be prescribed later by way of rules. Accordingly,

1. Every registered person shall be entitled to take credit
2. Input tax credit can be taken on self assessment basis as per the return filed by such taxable person
3. Such credit will be allowed (amount credited) in his electronic credit ledger maintained
4. Allowability of credit shall be subject to such conditions, restrictions and manner to be prescribed later.

It may be noted that this provision will not entitle any person to take input credit if –

1. he is not registered, or
2. he has not filed his return and not discharged tax liability

Application of Provisions of CGST Act

Section 29 of the CGST Act provides for matching, reversal and reclaims of input tax credit. It prescribes manner of matching / reconciliation and time lines for this purpose. Those provisions shall apply mutatis mutandis to IGST also.

Transfer of Credit (Section 9)

The input Tax credit availed can be utilized only as provided in section 7(5) of this Act (Refer Part 8 of this series of articles). Once credit is utilized as such, the amount collected as IGST shall stand reduced by an amount equal to the credit so utilized and the Central Government shall transfer an amount equal to the amount so reduced from the IGST account to the CGST account in the manner and time as may be prescribed. The Rules will provide for manner and time lines.

On utilization of input tax credit for payment of CGST, following actions will follow:

1. Amount of IGST collection will stand reduced by the amount of credit utilized in electronic credit ledger, and
2. Central Government will transfer the amount of IGST collected as reduced from IGST account (as per (i) above) to CGST account.

On utilization of input tax credit for payment of SGST, following actions will follow –

1. Amount of IGST collection will stand reduced by the amount of credit utilized in electronic credit ledger, and
2. Central Government will transfer the amount of IGST collected as reduced from IGST account (as per (i) above) to SGST account.

The aforesaid actions will be subject to Rules to be framed later.

 

(To be continued …….)

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