Credit of CGST paid on inputs may be used only for paying CGST on the output and the credit of SGST paid on inputs may be used only for paying SGST. In other words, the two streams of input tax credit (ITC) cannot be cross utilised, except in specified circumstances of inter-State supplies, for payment of IGST. The credit would be permitted to be utilised in the following manner:

  1. ITC of CGST allowed for payment of CGST;
  2. ITC of SGST allowed for payment of SGST;
  3. ITC of CGST allowed for payment of CGST & IGST in that order;
  4. ITC of SGST allowed for payment of SGST & IGST in that order;
  5. ITC of IGST allowed for payment of IGST, CGST & SGST in that order
  • ITC of Additional Tax would not be permitted.
  • Accounts would be settled periodically between the Centre and the State to ensure that the credit of SGST used for payment of IGST is transferred by the Exporting State to the Centre. Similarly the IGST used for payment of SGST would be transferred by the Centre to the Importing State.
  • The laws, regulations and procedures for levy and collection of CGST and SGST would be harmonized to the extent possible.

Example – Input Tax Credit

Samir, a registered dealer had input tax credit for CGST and SGST Rs.750/- and Rs.1, 050/- respectively in respect of purchase of inputs and capital goods. He manufactured 2000 litres of finished products. The final product was sold at uniform price of Rs.10 per litre as follows:-

Goods sold within State – 800 litres.

Finished product sold in inter-State sale – 750 litres.

Goods sent on stock transfer to consignment agents outside the State – 450 litres.

Further, CGST and SGST rate on the finished product of dealer is 5% and 7% respectively. Further IGST rate is 12%. Calculate tax liability of SGST and CGST to be paid after tax credit. ( rate assumed for illustrative purpose)

Solution:

Output Tax Calculation

Particulars Sales Within State Stock Transfer Outside State Inter State Sales Total
 

Qty. sold

800 450 750
 

Price per unit

10 10 10
 

VALUE OF GOODS SOLD

8000 4500 7500 20000
 

Tax amount

 

Tax amt:CGST@5%

400 400
 

Tax amt : SGST@7%

560 560
 

Tax amt :@12%

540 900 1440

 

 

CALCULATION OF TAX PAYABLE

PARTICULARS CGST SGST IGST TOTAL
TAX PAYABLE AMT 400 560 1440
LESS: INPUT TAX CREDIT
CGST 400 350 750
SGST 560 490 1050
BALANCE PAYABLE 600 600

NOTES:

Input tax credit of CGST and SGST of Rs. 750 and Rs. 1050 are paid on inputs. This input tax credit should first be utilized for payment of CGST and SGST, respectively, and balance is to be used for payment of IGST. Thus, balance available for payment of IGST is Rs. 350 of CGST and Rs. 490 of SGST and he is liable to pay balance amount of IGST of Rs. 600 by cash (1440-350-490 = 600). Since credit of SGST of Rs.490 has been utilized for payment of IGST, the State Government will get debit of Rs. 490 from the Central Government.

Example –2 (Input Tax Credit)

Now, continuing with the above example 1, suppose the dealer purchases goods interstate and have input tax credit of IGST available is Rs.2,300/-. Compute the tax payable.

Solution:

Calculation of Tax Payable

PARTICULARS CGST SGST IGST TOTAL
TAX PAYABLE AMT 400 560 1440
LESS : INPUT TAX CREDIT
CGST
SGST —- —– —-
IGST 400 460 1440 2300
BALANCE PAYABLE —– 100 —- 100

 

 

Note: Input tax credit of Rs.2300, IGST is available. This input tax credit should first be utilized for payment of IGST and balance is to be used first for payment of CGST and remaining for SGST. Likewise in this case Rs.400 and balance Rs.400 are utilized for CGST and SGST respectively. He is liable to pay balance amount of SGST of Rs.100 by cash.(2300-1440-400-560 = 100).

Source: 1] cbec.gov.in

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