Clarification in respect of utilization of input tax credit under GST - GST - States - Circular No. 21/2019

GOVERNMENT OF ANDHRA PRADESH COMMERCIAL TAXES DEPARTMENT Proceedings of the Chief Commissioner of State Tax Present : Sri. J.Syamala Rao, I.A.S. O/o The Chief Commissioner of State Taxes, Eedupugallu. CCSTs ref.CCW/74/GST/2015 Dt. 26.05.2019 Circular No. 21/2019 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 the Andhra Pradesh Goods and Services Tax (Amendment) Act, 2018 [hereinafter referred to as the APGST (Amendment) Act]. The amended provisions came into effect from 1 st February 2019. 2. Various representations have been received from the trade and industry regarding challenges being faced by taxpayers due to bringing into force of section 49A of the Andhra Pradesh Goods and Services Tax Act, 2017 (hereinafter referred to as the APGST 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 Central tax) through electronic cash ledger in certain scenarios. Accordingly, rule 88A was inserted in the Andhra Pradesh Goods and Services Tax Rules, 2017 (hereinafter referred to as the APGST Rules) in exercise of the powers under Section 49B of the APGST Act vide notification No. 16/2019-Central Tax, Dated 29th March, 2019. In order to ensure uniformity in the implementation of the provisions of the law, the Chief Commissioner, in exercise of his powers conferred by section 168 (1) of the APGST Act, hereby clarifies the issues raised as below. 3. The newly inserted Section 49A of the APGST 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 APGST 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 APGST 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 APGST 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 Input tax Credit on account of Integrated tax has been completely exhausted Central tax 0 200 - 0 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 APGST (Amendment) Act i.e. pre-insertion of Section 49A and Section 49B of the APGST Act. Therefore, till the new order of utilization as per newly inserted Rule 88A of the APGST 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. The field officers are requested to publicize the contents of this circular. Chief Commissioner