Introduction-
Input Tax Credit means Input availed on purchase of goods whether it is purchased from the same state or it is purchased from another state. Earlier to GST Act, we can avail credit of vat paid on local purchase but we cannot take credit of tax paid on Interstate purchase i.e. CST. But after introduction of GST Act, we can avail credit of tax i.e. GST, whether paid on local purchase or purchase from another state.
What is Input Tax Credit-
IGST Input Tax Credit- IGST input tax credit is that which we have paid on purchase of goods from another state, says we are in Panchkula (Haryana State) and purchased material from Amritsar (Punjab State). It will be charged in the form of IGST on purchase, we can take credit of the same under IGST credit which can be first adjusted with IGST payable then CGST payable or last SGST payable.
SGST Input Tax Credit- SGST input tax credit is that which we have paid on purchase of goods from same state, says we are in Panchkula (Haryana State) and purchased material from Ambala (Haryana State). It will be charged in the form SGST & CGST in equal proportionate on purchase, we can take credit of SGST charged on purchase under SGST credit and credit of CGST charged on purchase under CGST credit. SGST credit can be first adjusted with SGST payable and then IGST payable.
CGST Input Tax Credit- CGST input tax credit is that which we have paid on purchase of goods from same state, says we are in Panchkula (Haryana State) and purchased material from Ambala (Haryana State). It will be charged in the form CGST & SGST in equal proportionate on purchase, we can take credit of CGST charged on purchase under CGST credit and credit of SGST charged on purchase under SGST credit. CGST credit can be first adjusted with CGST payable and then IGST payable.
How, we can adjust credit of taxes paid, whether in the form of IGST, SGST or CGST are as under-
IGST payable will be first set off against IGST credit, then CGST credit and then SGST credit.
SGST payable will be first set off against SGST credit and then IGST credit. It cannot be set off against CGST.
CGST payable will be first set off against CGST credit and then IGST credit. It cannot be set off against SGST.
Example 1 - (Input Credit of IGST)
If Mr. X of Ambala (Haryana State), purchase goods from Jallandhar (Punjab State) of Rs. 50,000, IGST charged @ 18% of Rs. 9,000. What will be the treatment of Input credit?
Answer-
Mr. X take credit of Rs. 9,000 paid on purchase of goods, under IGST input tax credit.
Example 2- (Input Credit of SGST & CGST)
If Mr. X of Ambala (Haryana State), purchase goods from Panchkula (Haryana State) of Rs. 50,000, CGST charged @ 9% of Rs. 4,500 or SGST charged @ 9% of Rs. 4,500. What will be the treatment of Input credit?
Answer-
Mr. X take credit of Rs. 9,000 paid on purchase of goods i.e. Rs. 4,500 under CGST input tax credit and Rs. 4,500 under SGST input tax credit.
Example 3 - (Liability of IGST)
If Mr. X has credit balance of IGST of Rs. 5,000, SGST of Rs. 10,000 or CGST of Rs. 10,000. His liability of IGST for the month is Rs. 20,000. How much amount will be adjusted?
Answer-
Mr. X has liability of IGST Rs. 20,000, first, he can set off with IGST credit then CGST credit and last SGST credit.
So, Mr. X can set off Rs. 5,000 from balance of IGST credit, then Rs. 10,000 from balance of CGST credit and balance of liability of Rs. 5,000 from SGST credit balance.
Example 4- (Liability of SGST)
If Mr. X has credit balance of IGST of Rs. 5,000, SGST of Rs. 10,000 or CGST of Rs. 10,000. His liability for the month of SGST Rs. 20,000. How much amount will be adjusted?
Answer-
Mr. X has liability of SGST Rs. 20,000, first, he can set off with SGST credit then IGST credit.
So, Mr. X can set off Rs. 10,000 from SGST credit balance and then Rs. 5,000 from IGST credit balance only. Balance liability of Rs. 5,000 will be deposited in cash. It cannot be set off with CGST.
Example 5- (Liability of CGST)
If Mr. X has credit balance of IGST of Rs. 5,000, SGST of Rs. 10,000 or CGST of Rs. 10,000. His liability for the month of CGST Rs. 20,000. How much amount will be adjusted?
Answer-
Mr. X has liability of CGST Rs. 20,000, first, he can set off with CGST credit then IGST credit.
So, Mr. X can set off Rs. 10,000 from CGST credit balance and then Rs. 5,000 from IGST credit balance only. Balance liability of Rs. 5,000 will be deposited in cash. It cannot be set off with SGST.
Note- CGST or SGST cannot be set off from each other.