Clarification in respect of utilization of input tax credit under GST. - GST - States - 933/GST-2

HARYANA GOVERNMENT EXCISE AND TAXATION DEPARTMENT From Excise Taxation Commissioner, Haryana, Panchkula . To All the Dy. Excise Taxation Commissioner (ST), in the State of' Haryana. Memo No. 933/GST-2 Panchkula, date the 30.04.2019 Subject: Clarification in respect of utilization of input tax credit under GST - Reg. Section 49 was amended and Section 49A and Section 49B were inserted vide Haryana Goods and Services Tax (Amendment) Act, 2018 [hereinafter referred to as the HGST (Amendment) Act]. The amended provisions came into effect from 1 st February 2019. 2. Various representations have from the trade and industry regarding challenges being faced by taxpayers due to bringing into force of section 49A of the Haryana Goods and Services Tax Act, 2017 (hereinafter referred to as the HGST Act). The issue has arisen on account of order of utilization of input tax of integrated tax in a particular order, resulting in accumulation of input tax credit for one kind of tax (say State tax) in electronic credit ledger and discharge of liability for the other kind of tax (say Central tax) through electronic cash ledger in certain scenarios. Accordingly, rule 88A was inserted in the Haryana Goods and Services Tax Rules, 2017 (hereinafter referred to as the HGST Rules) in exercise of the powers under Section 49B of the HGST Act vide notification No.54/GST-2. dated the 11 th April, 2019. In order to ensure uniformity in the implementation of the provisions of the law, the Commissioner of State Tax, in exercise of its conferred by section 168 of the HGST Act, hereby clarifies the issues raised as below. 3. The newly inserted Section 49A of the HGST Act provides that the input tax credit of Integrated tax has to utilized completely before input tax credit of Central tax / State tax can utilized for discharge of any tax liability. Further, as per the provisions of section 49 of the HGST Act, credit Of Integrated tax has to be utilized first for payment of Integrated tax, then Central tax and then State tax in that order mandatorily. This led to a situation, in certain cases, where a taxpayer has to discharge his tax liability on account of one type of tax (say State tax) through electronic cash ledger, while the input tax credit on account of other of tax (say Central tax) remains un-utilized in electronic credit ledger. 4. The newly inserted rule 88A in the HGST Rules allows utilization of input tax credit of Integrated tax towards the payment of Central tax and State tax, in any order subject to the condition that the entire input tax credit on account of Integrated tax is completely exhausted first input tax credit on account of Central tax or State tax can utilized. It is clarified that after the insertion of the said rule. the order of utilization of input tax credit will be as per the order (of numerals) given below: Input tax Credit on account of Output liability on account of Integrated tax Output liability on account of Central tax Output liability on account of State tax Integrated tax (I) (II) In any order and in any proportion (III) Input tax Credit account of Integrated tax to be completely exhausted mandatorily Central tax (V) (IV) Not permitted State Tax (VII) Not permitted (VI) 5. The following illustration would further amplify the impact of newly inserted rule 88A of the HGST Rules: Illustration: Amount of Input tax Credit available and output liability under different heads Head Output Liability Input tax Credit Integrated tax 1000 1300 Central tax 300 200 State Tax 300 200 Total 1600 1700 Option 1: Input tax Credit an account of Discharge of output liability on account of Integrated tax Discharge of output liability on account of Central tax Discharge of output liability on account of State tax Balance of Input Tax Credit Integrated tax 1000 200 100 0 Input tax Credit on account of Integrated tax has been completely exhausted Central tax 0 100 - 100 State Tax 0 - 200 0 Total 1000 300 300 100 Option 2: Input tax Credit an account of Discharge of output liability on account of Integrated tax Discharge of output liability on account of Central tax Discharge of output liability on account of State tax Balance of Input Tax Credit Integrated tax 1000 100 200 0 Input tax Credit on account of Integrated tax has been completely exhausted Central tax 0 200 - 0 State Tax 0 - 100 100 Total 1000 300 300 100 6. Presently, the common portal supports the order of utilization of input tax credit in accordance with the provisions before implementation of the provisions of the HGST (Amendment) Act i.e. pre-insertion of Section 49A and Section 49B of the HGST Act. Therefore, till the new order of utilization as per newly inserted Rule 88A of the HGST Rules is implemented on the common portal, taxpayers may continue to utilize their input tax credit as per the functionality available on the common portal. 7. Difficulty, if any, in the implementation of this Circular may be brought to the notice of the Department. Amit Kumar Agrawal Excise Taxation Commissioner-cum- Commissioner of State Tax, Haryana