Clarification in respect of utilization of input tax credit under GST. - GST - States - 098/17/2019-GST

Circular No. 98/17/2019-GST No. 12-25/2018-19-EXN-GST-(575)-21109-21127 Government of Himachal Pradesh, Excise and Taxation Department To 1. The Additional/Jt. Commissioner of State Taxes and Excise, (South Zone, North Zone, Central Zone), Shimla, Palampur, Mandi, H.P. 2. The Joint Commissioner of State Taxes and Excise, Flying Squad, (Central Zone, North Zone, South Zone), Una, Palampur, Parwanoo, H.P. 3. The Dy. Commissioner of State Taxes and Excise, Shimla, Solan, BBN Baddi, Sirmour, Bilaspur, Hamirpur, Mandi. Kullu, Chamba, Kangra, Revenue Distt Nurpur and Una, H.P 4. The Asstt. Commissioner of State Taxes and Excise, Incharge Distt. Kinnour, H.P Dated Shimla-9 2nd Aug., 2019 Madam/Sir, Subject: Clarification in respect of utilization of input tax credit under GST. Section 49 was amended and Section 49A and Section 49B were inserted vide Himachal Pradesh Goods and Services Tax (Amendment) Act, 2018 [hereinafter referred to as the HPGST (Amendment) Act]. The amended provisions came into effect from 1st February 2019. 2. Various doubts have been raised by trade and industry regarding challenges being faced by taxpayers due to bringing into force of section 49A of the Himachal Pradesh Goods and Services Tax Act, 2017 (hereinafter referred to as the HPGST Act). The issue has arisen on account of order of utilization of input tax credit 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 state tax) through electronic cash ledger in certain scenarios. Accordingly, rule 88A was inserted in the Himachal Pradesh Goods and Services Tax Rules, 2017 (hereinafter referred to as the HPGST Rules) in exercise of the powers under Section 49B of the HPGST Act vide notification No. 16/2019-State Tax, dated 30th May, 2019. In order to ensure uniformity in the implementation of the provisions of the law, in exercise of its powers conferred by section 168 (1) of the HPGST Act, I hereby clarify the issues raised as below. 3. The newly inserted Section 49A of the HPGST Act provides that the input tax credit of Integrated tax has to be utilized completely before input tax credit of Central tax / State tax can be utilized for discharge of any tax liability. Further, as per the provisions of section 49 of the HPGST 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 type of tax (say Central tax) remains un-utilized in electronic credit ledger. 4. The newly inserted rule 88A in the HPGST Rules allows utilization of input tax credit of Integrated tax towards the payment of Central tax and State tax, or as the case may be, Union territory tax, in any order subject to the condition that the entire input tax credit on account of Integrated tax is completely exhausted first before the input tax credit on account of Central tax or State / Union territory tax can be 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 / Union Territory tax Integrated tax (I) (II) In any order and in any proportion (III) Input tax Credit on account of Integrated tax to be completely exhausted mandatorily Central tax (V) (IV) Not permitted State tax / Union Territory tax (VII) Not permitted (VI) 5. The following illustration would further amplify the impact of newly inserted rule 88A of the HPGST Rules: Illustration : Amount of Input tax Credit available and output liability under different tax heads Head Output Liability Input tax Credit Integrated tax 1000 1300 Central tax 300 200 State tax / Union Territory tax 300 200 Total 1600 1700 Option 1: Input tax Credit on 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 / Union Territory 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 / Union territory tax 0 - 200 0 Total 1000 300 300 100 Option 2: Input tax Credit on 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 / Union Territory tax Balance of Input Tax Credit Integrated tax 1000 100 200 0 Central tax 0 - 100 100 State tax / Union territory 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 HPGST (Amendment) Act, i.e., pre-insertion of Section 49A and Section 49B of the HPGST Act. Therefore, till the new order of utilization as per newly inserted Rule 88A of the HPGST 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. This Circular shall come into force w.e.f. 23.04.2019. 8. Difficulty, if any, in the implementation of this Circular may be brought to the notice of this office. Dr. Ajay Sharma, (IAS) Commissioner of State Taxes and Excise, Himachal Pradesh