New Set off rules as per Rule 88A

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On 23rd​​ April 2019, CBIC has issued the circular no. 98/17/2019 clarifying the nature of utilization of Input Tax Credit under GST according to Rule 88A. The said clarification has been issued by the CBIC to clear the air on the manner of the utilization of the Input Tax credit while settling the Output tax liability. On 29th​​ March 2019, CBIC has notified Rule 88A vide Notification no. 16/2019 dated 29th​​ March 2019, in which the rule describes the manner of utilization of Input tax credit.

Rule 88A

Input tax credit on account of integrated tax shall first be utilized towards payment of integrated tax, and the amount of remaining, if any, may be utilized towards the payment of central tax and state tax or Union territory tax, as the case may be, in any order.

Provided that the input tax credit on account of central tax, state tax or Union territory tax shall be utilized towards payment of integrated tax, central tax, State tax or Union territory tax, as the case may be, only after the input tax credit available on account of Integrated tax has first been utilized only.

After Section 49A and 49B has been notified by CBIC, a major concern has been the centre of the discussion regarding the utilization of Input tax credit. It has been emphasized that the Input tax credit on account of Integrated tax shall first be utilized completely while settling any output tax liability. In some scenarios while making the calculation, it has led to the situations where the taxpayer on one hand has to settle one type of tax , lets say, CGST from Electronic cash ledger while the other type of tax, lets say, input tax credit of SGST is lying in the Electronic Credit ledger. Thus, this type of system is putting a lot of pressure on the taxable persons regarding the fund availability for the payment of GST as they have to pay the GST irrespective of the fact that they are having the ITC on account of other tax type in their electronic credit ledger. The Government is also aware of the facts that the new system will put exorbitant hole in the wallets of the taxable persons which will not go well down the line with the taxable persons, hence, the Government has till now not implemented the new system of ITC utilization in their portal.

So, in order to remove the cascading effect of the Section 49A, a new rule 88A has been inserted vide Notification no. 16/2019 dated 29th​​ March 2019. The rule says that the input tax credit on account of integrated tax shall first be utilized towards payment of integrated tax and the remaining amount shall be utilized towards the payment of central tax and state tax or union territory tax, as the case may be, in any manner and order. Thus, giving a big relief to the taxable persons and removing the cascading effect of section 49A.

Let’s understand the concept of rule 88A with some examples:-

  • Having Sale (Local + Central) and Purchase (Local + Central)

Example​​ ​​ M/s. ABC Co., deals in trading of Stainless Steel items, ​​​​ recorded the sale of Rs. 1,50,00,000/- in the month of January 2019, out of which the Rs. 80,00,000/- pertains to Inter State sale and Rs. 70,00,000/- pertains to Intra State sale. The GST rate is 18% on the items. The purchase for the month is Rs. 1,45,00,000/- , of which the Inter State Purchase is Rs. 105,00,000/- and the Intra State Purchase is Rs. 40,00,000/-. ​​​​ Lets analyse the impact with both the method of calculations.

Outward

Particulars

Amount​​ 

Tax

Central sale

80,00,000/-

14,40,000/-

Local sale

70,00,000/-

12,60,000/-

Total

1,50,00,000/-

27,00,000/-

Inward

Particulars

Amount​​ 

Tax

Central purchase

1,05,00,000/-

18,90,000/-

Local purchase

40,00,000/-

7,20,000/-

Total

1,45,00,000/-

26,10,000/-

Calculations under old scheme

Tax Payable Reconciliation (Excluding RCM)

Particulars

Payable

​​ IGST​​ 

CGST

SGST

Balance

IGST

 ​​ ​​ ​​ ​​ ​​​​ 14,40,000​​ 

 ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​​​ 14,40,000​​ 

 ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​​​ - ​​ ​​​​ 

 ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​​​ - ​​ ​​​​ 

 ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​​​ - ​​ ​​​​ 

CGST

 ​​ ​​ ​​ ​​ ​​ ​​​​ 6,30,000​​ 

 ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​​​ 2,70,000​​ 

 ​​ ​​ ​​ ​​ ​​ ​​​​ 3,60,000​​ 

 

 ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​​​ - ​​ ​​​​ 

SGST

 ​​ ​​ ​​ ​​ ​​ ​​​​ 6,30,000​​ 

 ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​​​ 1,80,000​​ 

 

 ​​ ​​ ​​ ​​ ​​ ​​​​ 3,60,000​​ 

 ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​​​ 90,000​​ 

Tax Credit Reconciliation

Particulars

​​ Opening Balance​​ 

​​ Credit availed ​​​​ 

​​ Credit utilised​​ 

​​ Closing Balance​​ 

IGST

 

 ​​ ​​ ​​​​ 18,90,000.00​​ 

 ​​ ​​ ​​​​ 18,90,000.00​​ 

 ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​​​ - ​​ ​​​​ 

CGST

 

 ​​ ​​ ​​ ​​ ​​​​ 3,60,000.00​​ 

 ​​ ​​ ​​ ​​ ​​​​ 3,60,000.00​​ 

 ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​​​ - ​​ ​​​​ 

SGST

 

 ​​ ​​ ​​ ​​ ​​​​ 3,60,000.00​​ 

 ​​ ​​ ​​ ​​ ​​​​ 3,60,000.00​​ 

 ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​​​ - ​​ ​​​​ 

 ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​​​ - ​​ ​​​​ 

 ​​ ​​​​ 26,10,000.00​​ 

 ​​ ​​​​ 26,10,000.00​​ 

 ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​​​ - ​​ ​​​​ 

Under New Scheme under rule 88A

Tax Payable Reconciliation (Excluding RCM)

Particulars

Payable

​​ IGST​​ 

CGST

SGST

Balance

IGST

 ​​ ​​ ​​ ​​ ​​​​ 14,40,000​​ 

 ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​​​ 14,40,000​​ 

 ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​​​ - ​​ ​​​​ 

 ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​​​ - ​​ ​​​​ 

 ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​​​ - ​​ ​​​​ 

CGST

 ​​ ​​ ​​ ​​ ​​ ​​​​ 6,30,000​​ 

 ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​​​ 2,70,000​​ 

 ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​​​ 3,60,000​​ 

 

 ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​​​ - ​​ ​​​​ 

SGST

 ​​ ​​ ​​ ​​ ​​ ​​​​ 6,30,000​​ 

 ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​​​ 1,80,000​​ 

 

 ​​ ​​ ​​ ​​ ​​ ​​​​ 3,60,000​​ 

 ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​​​ 90,000​​ 

Tax Credit Reconciliation

Particulars

​​ Opening Balance​​ 

​​ Credit availed ​​​​ 

​​ Credit utilised​​ 

​​ Closing Balance​​ 

IGST

 

 ​​ ​​ ​​​​ 18,90,000.00​​ 

 ​​ ​​ ​​​​ 18,90,000.00​​ 

 ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​​​ - ​​ ​​​​ 

CGST

 

 ​​ ​​ ​​ ​​ ​​​​ 3,60,000.00​​ 

 ​​ ​​ ​​ ​​ ​​​​ 3,60,000.00​​ 

 ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​​​ - ​​ ​​​​ 

SGST

 

 ​​ ​​ ​​ ​​ ​​​​ 3,60,000.00​​ 

 ​​ ​​ ​​ ​​ ​​​​ 3,60,000.00​​ 

 ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​​​ - ​​ ​​​​ 

 ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​​​ - ​​ ​​​​ 

 ​​ ​​​​ 26,10,000.00​​ 

 ​​ ​​​​ 26,10,000.00​​ 

 ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​​​ - ​​ ​​​​ 

As we can analyze from both the examples, the manner of utilization of Input tax credit is verbatim in both the cases, hence, not putting any extra pressure on the taxable person for the payment of output tax liability.

  • Having Sale (Local + central) and Purchase (Central)

Example​​ ​​ M/s. ABC Co., deals in trading of Stainless Steel items, ​​​​ recorded the sale of Rs. 1,50,00,000/- in the month of January 2019, out of which the Rs. 80,00,000/- pertains to Inter State sale and Rs. 70,00,000/- pertains to Intra State sale. The GST rate is 18% on the items. The Central purchase for the month is Rs. 1,45,00,000/-. Let’s analyse the impact with both the method of calculations.

​​ 

Outward

Particulars

​​ Amount​​ 

​​ Nature of Tax​​ 

​​ Tax​​ 

Outward supplies

 ​​ ​​ ​​​​ 70,00,000​​ 

Local Sale

 ​​ ​​ ​​ ​​ ​​ ​​ ​​​​ 12,60,000​​ 

Outward supplies

 ​​ ​​ ​​​​ 80,00,000​​ 

Central Sale

 ​​ ​​ ​​ ​​ ​​ ​​ ​​​​ 14,40,000​​ 

Inward

Particulars

​​ Amount​​ 

​​ Nature of Tax​​ 

​​ Tax​​ 

Inward supplies

 ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​​​ - ​​ ​​​​ 

Local Purchase

 ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​​​ - ​​ ​​​​ 

Inward supplies

 ​​​​ 1,45,00,000​​ 

Central Purchase

 ​​ ​​ ​​ ​​ ​​ ​​ ​​​​ 26,10,000​​ 

Calculations under Old scheme

Tax Payable Reconciliation (Excluding RCM)

Particulars

Payable

​​ IGST​​ 

CGST

SGST

Balance

IGST

 ​​ ​​ ​​ ​​ ​​​​ 14,40,000​​ 

 ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​​​ 14,40,000​​ 

 ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​​​ - ​​ ​​​​ 

 ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​​​ - ​​ ​​​​ 

 ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​​​ - ​​ ​​​​ 

CGST

 ​​ ​​ ​​ ​​ ​​ ​​​​ 6,30,000​​ 

 ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​​​ 6,30,000​​ 

 

 

 ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​​​ - ​​ ​​​​ 

SGST

 ​​ ​​ ​​ ​​ ​​ ​​​​ 6,30,000​​ 

 ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​​​ 5,40,000​​ 

 

 

 ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​​​ 90,000​​ 

Tax Credit Reconciliation

Particulars

​​ Opening Balance​​ 

​​ Credit availed ​​​​ 

​​ Credit utilised​​ 

​​ Closing Balance​​ 

IGST

 

 ​​ ​​ ​​​​ 26,10,000.00​​ 

 ​​ ​​ ​​​​ 26,10,000.00​​ 

 ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​​​ - ​​ ​​​​ 

CGST

 

 

 ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​​​ - ​​ ​​​​ 

 ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​​​ - ​​ ​​​​ 

SGST

 

 

 ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​​​ - ​​ ​​​​ 

 ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​​​ - ​​ ​​​​ 

Under Rule 88A

Tax Payable Reconciliation (Excluding RCM)

Particulars

Payable

​​ IGST​​ 

CGST

SGST

Balance

IGST

 ​​ ​​ ​​ ​​ ​​​​ 14,40,000​​ 

 ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​​​ 14,40,000​​ 

 ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​​​ - ​​ ​​​​ 

 ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​​​ - ​​ ​​​​ 

 ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​​​ - ​​ ​​​​ 

CGST

 ​​ ​​ ​​ ​​ ​​ ​​​​ 6,30,000​​ 

 ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​​​ 6,00,000​​ 

 

 

 ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​​​ 30,000​​ 

SGST

 ​​ ​​ ​​ ​​ ​​ ​​​​ 6,30,000​​ 

 ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​​​ 5,70,000​​ 

 

 

 ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​​​ 60,000​​ 

Tax Credit Reconciliation

Particulars

​​ Opening Balance​​ 

​​ Credit availed ​​​​ 

​​ Credit utilised​​ 

​​ Closing Balance​​ 

IGST

 

 ​​ ​​ ​​​​ 26,10,000.00​​ 

 ​​ ​​ ​​​​ 26,10,000.00​​ 

 ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​​​ - ​​ ​​​​ 

CGST

 

 

 ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​​​ - ​​ ​​​​ 

 ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​​​ - ​​ ​​​​ 

SGST

 

 

 ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​​​ - ​​ ​​​​ 

 ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​​​ - ​​ ​​​​ 

In this scenario, the net liability in both the cases is Rs. 90,000/- irrespective of the manner of the utilization of the ITC on account of Integrated tax. Thus, not effecting the taxable person as such.

  • Having Sale (Local + central ) and Purchase (Local)

Example​​ ​​ M/s. ABC Co., deals in trading of Stainless Steel items, ​​​​ recorded the sale of Rs. 1,50,00,000/- in the month of January 2019, out of which the Rs. 80,00,000/- pertains to Inter State sale and Rs. 70,00,000/- pertains to Intra State sale. The GST rate is 18% on the items. The Local purchase for the month is Rs. 1,45,00,000/-. Let’s analyse the impact with both the method of calculations.

Outward

Particulars

Amount

Nature of Tax

Tax

Outward supplies

70,00,000

Local Sale

12,60,000

Outward supplies

80,00,000

Central Sale

14,40,000

Inward

Particulars

Amount

Nature of Tax

Tax

Inward supplies

1,45,00,000

Local Purchase

26,10,000

Inward supplies

-

Central Purchase

-

Under old rule

Tax Payable Reconciliation (Excluding RCM)

Particulars

Payable

​​ IGST​​ 

CGST

SGST

Balance

IGST

 ​​ ​​ ​​ ​​ ​​​​ 14,40,000​​ 

 

 ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​​​ 6,75,000​​ 

 ​​ ​​ ​​ ​​ ​​ ​​​​ 6,75,000​​ 

 ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​​​ 90,000​​ 

CGST

 ​​ ​​ ​​ ​​ ​​ ​​​​ 6,30,000​​ 

 

 ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​​​ 6,30,000​​ 

 

 ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​​​ - ​​ ​​​​ 

SGST

 ​​ ​​ ​​ ​​ ​​ ​​​​ 6,30,000​​ 

 

 

 ​​ ​​ ​​ ​​ ​​ ​​​​ 6,30,000​​ 

 ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​​​ - ​​ ​​​​ 

Tax Credit Reconciliation

Particulars

​​ Opening Balance​​ 

​​ Credit availed ​​​​ 

​​ Credit utilised​​ 

​​ Closing Balance​​ 

IGST

 

 

 ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​​​ - ​​ ​​​​ 

 ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​​​ - ​​ ​​​​ 

CGST

 

 ​​ ​​ ​​​​ 13,05,000.00​​ 

 ​​ ​​ ​​​​ 13,05,000.00​​ 

 ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​​​ - ​​ ​​​​ 

SGST

 

 ​​ ​​ ​​​​ 13,05,000.00​​ 

 ​​ ​​ ​​​​ 13,05,000.00​​ 

 ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​​​ - ​​ ​​​​ 

Under New rule as per Rule 88A

Tax Payable Reconciliation (Excluding RCM)

Particulars

Payable

​​ IGST​​ 

CGST

SGST

Balance

IGST

 ​​ ​​ ​​ ​​ ​​​​ 14,40,000​​ 

 

 ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​​​ 6,75,000​​ 

 ​​ ​​ ​​ ​​ ​​ ​​​​ 6,75,000​​ 

 ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​​​ 90,000​​ 

CGST

 ​​ ​​ ​​ ​​ ​​ ​​​​ 6,30,000​​ 

 

 ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​​​ 6,30,000​​ 

 

 ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​​​ - ​​ ​​​​ 

SGST

 ​​ ​​ ​​ ​​ ​​ ​​​​ 6,30,000​​ 

 

 

 ​​ ​​ ​​ ​​ ​​ ​​​​ 6,30,000​​ 

 ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​​​ - ​​ ​​​​ 

Tax Credit Reconciliation

Particulars

​​ Opening Balance​​ 

​​ Credit availed ​​​​ 

​​ Credit utilised​​ 

​​ Closing Balance​​ 

IGST

 

 ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​​​ - ​​ ​​​​ 

 ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​​​ - ​​ ​​​​ 

CGST

 ​​ ​​ ​​​​ 13,05,000.00​​ 

 

 ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​​​ - ​​ ​​​​ 

SGST

 

 ​​ ​​ ​​​​ 13,05,000.00​​ 

 

 ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​​​ - ​​ ​​​​ 

In both the scenarios, there is no impact as there is no IGST input tax credit. Hence, not changing the calculations in both the cases.

  • Having Sale (Local) and Purchase (Central + Local)

Example​​ ​​ M/s. ABC Co., deals in trading of Stainless Steel items, recorded the Local sale of Rs. 1,50,00,000/- in the month of January 2019. The GST rate is 18% on the items. The Central purchase for the month is Rs. 75,00,000/- and Central purchase is Rs. 70,00,000/-. Lets analyse the impact with both the method of calculations

Outward

Particulars

Amount

Nature of Tax

Tax

Outward supplies

1,50,00,000/-

Local Sale

27,00,000/-

Outward supplies

Central Sale

Inward

Particulars

Amount

Nature of Tax

Tax

Inward supplies

70,00,000

Local Purchase

12,60,000

Inward supplies

75,00,000

Central Purchase

13,50,000

Under Old Rule

Tax Payable Reconciliation (Excluding RCM)

Particulars

Payable

IGST

CGST

SGST

Balance

IGST

 

 ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​​​ - ​​ ​​​​ 

 

 

 ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​​​ - ​​ ​​​​ 

CGST

 ​​ ​​ ​​ ​​ ​​​​ 1,350,000​​ 

 ​​ ​​ ​​ ​​ ​​ ​​​​ 720,000.00​​ 

 ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​​​ 630,000​​ 

 

 ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​​​ - ​​ ​​​​ 

SGST

 ​​ ​​ ​​ ​​ ​​​​ 1,350,000​​ 

 ​​ ​​ ​​ ​​ ​​ ​​​​ 630,000.00​​ 

 

630000

 ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​​​ 90,000​​ 

Tax Credit Reconciliation

Particulars

​​ Opening Balance​​ 

​​ Credit availed ​​​​ 

​​ Credit utilised​​ 

​​ Closing Balance​​ 

IGST

 ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​​​ - ​​ ​​​​ 

 ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​​​ 1,350,000​​ 

 ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​​​ 1,350,000​​ 

 ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​​​ - ​​ ​​​​ 

CGST

 ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​​​ - ​​ ​​​​ 

 ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​​​ 630,000​​ 

 ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​​​ 630,000​​ 

 ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​​​ - ​​ ​​​​ 

SGST

 ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​​​ - ​​ ​​​​ 

 ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​​​ 630,000​​ 

 ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​​​ 630,000​​ 

 ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​​​ - ​​ ​​​​ 

Now, as per new rule 88A

Tax Payable Reconciliation (Excluding RCM)

Particulars

Payable

IGST

CGST

SGST

Balance

IGST

 

 ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​​​ - ​​ ​​​​ 

 

 

 ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​​​ - ​​ ​​​​ 

CGST

 ​​ ​​ ​​ ​​ ​​​​ 1,350,000​​ 

 ​​ ​​ ​​ ​​ ​​ ​​​​ 700,000.00​​ 

 ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​​​ 630,000​​ 

 

 ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​​​ 20,000​​ 

SGST

 ​​ ​​ ​​ ​​ ​​​​ 1,350,000​​ 

 ​​ ​​ ​​ ​​ ​​ ​​​​ 650,000.00​​ 

 

 ​​ ​​ ​​ ​​ ​​ ​​ ​​​​ 630,000​​ 

 ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​​​ 70,000​​ 

Tax Credit Reconciliation

Particulars

​​ Opening Balance​​ 

​​ Credit availed ​​​​ 

​​ Credit utilised​​ 

​​ Closing Balance​​ 

IGST

 ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​​​ - ​​ ​​​​ 

 ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​​​ 1,350,000​​ 

 ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​​​ 1,350,000​​ 

 ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​​​ - ​​ ​​​​ 

CGST

 ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​​​ - ​​ ​​​​ 

 ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​​​ 630,000​​ 

 ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​​​ 630,000​​ 

 ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​​​ - ​​ ​​​​ 

SGST

 ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​​​ - ​​ ​​​​ 

 ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​​​ 630,000​​ 

 ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​​​ 630,000​​ 

 ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​ ​​​​ - ​​ ​​​​ 

Even, in this scenario, the net output tax liability in both the cases amount to Rs. 90,000/-. In the first case, the SGST is payable of Rs. 90,000/- however in the second case the CGST payable is Rs. 20,000/- and the SGST payable is Rs. 70,000/- respectively. Hence, not affecting the fund flow of the Taxable person as such and removing the cascading effect of Section 49A.

CONCLUSION​​ ​​ With the introduction of Rule 88A, the cascading effect of Section 49A has been eliminated. Thus, the taxable person has now not liable to pay the GST payable irrespective of having ITC credit in their Electronic Credit Ledger. Hence, with both the calculation, the end results are same.

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