Utilisation of Input Tax Credit

Under Goods & Services Tax, Input Tax Credit also known as ITC is a credit that is available to the supplier to cancel out the tax paid by the supplier on the purchase of goods with the output tax on the sale of goods. Consequently, the tax will be levied on the value added resulting in the avoidance of double taxation.

Furthermore, in relation to a taxable person, input tax means the chargeable tax, in the course or furtherance of any supply of goods and/or services to him, but exclude the tax paid under the Composition Scheme.

The taxes are divided into 3 main parts, Under GST Regime: 

1. Integrated Goods and Services Tax (IGST) 

2. Central Goods and Services Tax (CGST)

3. State Goods and Services Tax (SGST) 

The utilisation of the Input Tax Credit of CGST:

The Input Tax Credit of CGST under the Goods and Services Tax shall be:

• First adjusted with payment of Output CGST
• And thereafter, it shall be adjusted with the payment of IGST

However, the Input Tax Credit of CGST under the Goods and Services Tax of CGST can’t be adjusted against SGST. 

The utilisation of the Input Tax Credit of SGST

The Input Tax Credit of SGST under the Goods and Services Tax shall be:

• First adjusted with payment of Output SGST
• And then, ITC shall be adjusted with the payments of IGST

However, the Input Tax Credit (ITC) of SGST cant be used to adjust against CGST under the Goods & Services Tax regime.

The utilisation of the Input Tax Credit of IGST:

The Input Tax Credit of IGST under the Goods and Services Tax shall be:

• First & Foremost be utilized towards the payment of IGST
• Secondly, against the payment of Output CGST
• Lastly, against the payment of Output SGST

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