Input Tax Credit Utilization of GST – Part-III
We have discussed in last article that how GST is calculated on purchase or sale of goods. In today’s blog we will discuss tax treatment of GST and its set-off or utilization.
If purchase and sale of goods or rendering of services done within a state, there will be CGST and SGST applicable on goods or services.
Suppose, M/s. ABC Ltd. (Gujarat State) purchases goods from M/s. XYZ Ltd. (Gujarat State) worth Rs. 10,000/- and rate of GST is 18%. Then M/s. ABC Ltd. will take a credit of SGST @ 9% i.e. Rs. 900/- and CGST @ 9% i.e. Rs.900/-.
Now, if M/s. ABC Ltd. sells these goods to M/s. PQR Ltd. (Gujarat State) worth Rs. 6,000/-, they have to collect GST @ 18% from M/s. PQR Ltd. So Tax Liability of SGST is @9% i.e. Rs. 540/- and CGST is @ 9% i.e. 540/-.
At the time of payment of tax, SGST can be set off against SGST liability and CGST can be set off against CGST liability. Hence, in our case, M/s. ABC Ltd. can avail tax credit of Rs. 1,800/- GST paid at the time of purchase of Goods against tax liability of Rs. 1,080/-.
Now, if M/s. ABC Ltd. sells some goods to M/s. STU Ltd. (Maharastra) worth Rs. 6,000/-, they have to collect IGST @ 18% from M/s. STU Ltd. So tax liability of IGST is Rs. 1,080/-.
At the time of payment of tax, remaining tax credit of SGST and CGST (i.e. Rs. 720/-) can be availed against the tax payment of IGST of Rs. 1,080/- in our case and balance Rs. 360/- will be paid to the exchequer.
Numeric summary of the above case is presented in the table below. Tax liability is shown in brackets.
| Particulars | Purchase/Sale Price | CGST @ 9% | SGST @ 9% | IGST @ 18% |
| Purchase of Goods (Gujarat) | 10,000 | 900 | 900 | – |
| Sale of Goods (Gujarat) | 6,000 | (540) | (540) | – |
| Sale of Goods (Maharastra) | 6,000 | – | – | (1080) |
The Input CGST and SGST can be utilized for tax payment of sale of goods within state as well as outside state as mentioned hereunder. Input credit utilization figures are shown in brackets.
| Particulars | CGST @ 9% | SGST @ 9% | IGST @ 18% |
– | |||
| Tax Liability on sale within Gujarat | 540 | 540 | – |
| Tax Credit on purchase within Gujarat | (540) | (540) | |
| Tax Liability on sale in Maharashtra | – | – | 1080 |
| Tax Credit on purchase within Gujarat of CGST | (360) | ||
| Tax Credit on purchase within Gujarat of SGST | (360) | ||
| Balance paid online | – | – | 360 |
In nutshell, the tax credit can be utilized as described in the table below:
| Particulars | CGST | SGST | IGST |
| CGST | YES | NO | YES |
| SGST | NO | YES | YES |
| IGST | YES | YES | YES |
We will discuss some interesting instances of implication of GST in my further articles. Your queries / feedback may please be emailed to me at [email protected] .
- By CA Jigar Patel