Adjustment of GST input credit proportion

This query is : Resolved

Daya (Querist)
Follow

30 June 2022 whether GST input can be set off
First completely set off IGST and
CGST and SGST set off in any ratio from IGST
CGST and SGST inter adjustment adjustment not possible.

Asha Kanta Sharma

Asha Kanta Sharma

(Expert)
Follow

06 July 2024 Under the GST law in India, the set-off (or utilization) of input tax credit (ITC) follows specific rules regarding the order and manner in which credits can be utilized. Here's how it generally works:

1. **Utilization Order:**
- **IGST Credit:** IGST credit is first utilized to pay off any IGST liability.
- **CGST Credit:** After utilizing IGST credit, the remaining IGST credit (if any) can be used to pay CGST liability.
- **SGST Credit:** Similarly, after utilizing IGST credit, the remaining IGST credit (if any) can also be used to pay SGST liability.

2. **Inter-State and Intra-State Adjustments:**
- IGST credit can be used for both IGST liability and then, if any remains, for CGST or SGST liabilities.
- However, CGST and SGST credits cannot be directly used to offset IGST liability.

3. **Ratio for CGST and SGST Utilization:**
- After IGST credit is exhausted, CGST and SGST credits can be used to offset respective CGST and SGST liabilities.
- There's no fixed ratio mandated by law for CGST and SGST utilization from IGST credit. Taxpayers can adjust these credits based on their specific liabilities.

4. **Inter Adjustment Between CGST and SGST:**
- CGST credit cannot be used to pay SGST liability, and vice versa. They are distinct tax components meant for Central and State governments respectively.

In summary, under GST regulations:
- IGST credit is first used to pay IGST liability.
- Remaining IGST credit can be used to pay CGST or SGST liabilities.
- CGST credit can only be used to pay CGST liability and SGST credit for SGST liability.

These rules ensure proper utilization of input tax credits and compliance with the dual GST structure in India, where taxes are levied both by the Central and State governments.