Sec 49 provides for Payment of tax, interest, penalty and other amounts under the CGST Act. Clause 5 of Sec 49 provides the manner for offsetting liabilities with input tax credit and order therein. i.e. Old method.

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Sec 49A was inserted vide CGST Amendment Act, 2018 to be effective from the date of notification issued later. Reads as under –

49A. Utilisation of input tax credit subject to certain conditions.

Notwithstanding anything contained in section 49, the input tax credit on account of CGST, SGST or UGST shall be utilized towards payment of IGST, CGST, SGST or UGST, as the case may be, only after the input tax credit available on account of IGST has first been utilised fully towards such payment.

Vide Notification No. 2/2019-Central Tax Dated 29.01.2019 effective date mentioned as 01.02.2019.Hence, the old method prescribed under Sec 49 is overridden by the conditions mentioned in Sec 49A from Feb 2019.

However, while filing returns for the month of Feb 2019, the GST portal was not allowing the new method, hence the industry followed the old method amongst opposing representations filed before the government in first place for this change.

In the quest to address the industry concerns and to bring more clarity on the new method, Rule 88A was inserted in April 2019 to allow IGST credit left in excess after IGST liability set off, to be adjusted with CGST or SGST in any manner of priority.

It was further clarified vide Circular No. 98/17/2019-GST Dated 23.04.2019 that during then, the common portal supports the order of utilization of input tax credit in accordance with the provisions before the implementation of Sec 49A i.e. old method. Therefore, till the new order of utilization as per newly inserted Rule 88A is implemented on GST portal, taxpayers may continue to utilize their input tax credit as per the functionality available on the common portal.

New Functionality Activated Payment: Utilization of IGST Credit (implemented in Form GSTR 3B only)22nd July, 2019

Taxpayers filing Form GSTR 3B will have to utilize IGST credit towards payment of Integrated tax, and the amount remaining, if any, may be utilised towards the payment of Central tax and State tax or Union territory tax, in any order.

This can be done provided that the input tax credit on account of Central tax, State tax or Union territory tax shall be utilised towards payment of Integrated tax, Central tax, State tax or Union territory tax, as the case may be, only after the input tax credit available on account of Integrated tax has first been utilised fully.

(Refer Section 49A of the CGST Act, 2017 & Rule 88A of the CGST Rules, 2017)

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