The government has amended the CGST Act 2017 vide CGST Amendment Act 2018, one of the most important change is the new itc set off rules in GST notification, new order to set-off GST credit, w.e.f 1st February 2019. According to this new rule, GST credit set off rules shall be fully utilized before utilizing the credit of CGST and SGST.
Rules of Set Off till January 2019
Rules of Set Off from 1st February 2019
|Payment for||1st set off from||2nd set off from||Payment for||1st set off from||2nd set off from|
|IGST||IGST||CGST and SGST||IGST||IGST||CGST and SGST|
Let us understand this with an example
IGST - Rs. 200
CGST - Rs. 50
SGST - Rs. 50
Output liability of
IGST - Rs. 100
CGST - Rs. 100
SGST - Rs. 100
As per the earlier GST credit set off rules, CGST & SGST credit can be utilized to set off the liability of CGST & SGST, respectively and balance can be paid through IGST credit. And the taxpayer has to pay nothing in cash.
But, as per new GST ITC set-off rules, IGST credit of 200 shall be utilized towards the payment of output liability of Rs. 100 of IGST and Rs. 100 of CGST.
This will lead to the accumulation of credit under CGST of Rs. 50 that can be carry forward along with this the SGST output liability of Rs. 50 will remain which shall be paid in cash.
There can be 5 cases (GST set off rules 2022) depending upon the nature and transaction of the business