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CBIC to pitch for a downward revision of FY20 GST collection target

CBIC to pitch for a downward revision of FY20 GST collection target

The Central Board of Indirect Taxes and Customs (CBIC) is likely to pitch for a downward revision of 2019-20 GST collection target of Rs 13.71 lakh crore for the full year’s Budget to be presented on July 5.

“So far, the collection target has been ambitious. We need to set more realistic targets,” a senior finance ministry official said.

CBIC is expected to request Finance Minister Nirmala Sitharaman for a cut in GST mop-up target announced in the Interim Budget on February 1.

“We haven’t taken a call yet on what the target should be. But it’s obvious that we can’t set a target we can’t achieve. It’s better to overachieve than under-achieve,” the official said.

For 2019-20, the government pegged Rs 13.71 lakh crore as GST collection.

The government had already scaled down the GST collection target by Rs 1 lakh crore, with the revised estimate for 2018-19 pegged at Rs 6.44 lakh crore as against the initial Budget target of Rs 7.44 lakh crore.

Out of the pegged Rs 6.44 lakh crore GST collections, the Centre was looking to collect CGST of Rs 5.04 lakh crore and IGST of Rs 50,000 crore.

In 2018-19, though the government met the combined GST target, the Centre’s GST mop-up fell short of the target outlined in the Budget.

The Centre’s GST revenue is estimated to be less by around Rs 70,000 crore from the revised estimate for 2018-19.

Source: Money-Control.
GST Council may meet next week; NAA extension likely to be on agenda

GST Council may meet next week; NAA extension likely to be on agenda

The next meeting of the GST (goods and services tax) Council could take place as early as next week after approval from the new finance minister. The focus will be on tackling the unfinished agenda requiring immediate attention like tax structure for solar projects, uniform tax rate on state-organised and state-authorised lotteries, taxing non-potable alcohol besides certain changes in the law, extension for the National Anti-profiteering Authority (NAA) and rate rationalisation.

“The next meeting is now expected anytime in early June. Though items that need urgent attention will be taken up first, issues like inclusion of natural gas along with other petroleum products and merging of the 12 per cent and 18 per cent slabs will be discussed in subsequent meetings as they are high up on this government’s agenda,” said an official.

The Delhi High Court had last month directed the government to review the tax structure for solar power projects. The government had provided a deemed valuation provision that entailed taxing 70 per cent of contract value as goods, taxable at 5 per cent, and balance 30 per cent as services, taxable at 18 per cent. However, the industry argued that the ad-hoc valuation did not provide a fair estimate of the actual split of goods and services. Typically, the said ratio in the solar sector is 90:10, the industry argues.

Besides, the divergent rulings by the Advance Ruling Authorities added to the confusion and a writ was filed by the Solar Power Development Association. “We are doing consultations with the Central Board of Indirect Taxes and Customs (CBIC) and the ministry of new and renewable energy,” said another government official.

The Council may also take up the case for extension of the NAA’s tenure, which is coming to an end in November. The NAA Chairman B N Sharma has informally asked for an extension due to pending cases. The Council has asked the NAA for data on the number of orders passed and the status of pending cases to come to a decision on extension. “There are two views. One is that the NAA should get a finite extension with a fixed timeline to clear cases, as was the objective initially. The other view is that the NAA may be needed for a longer time as certain items like petroleum and alcohol are yet to be brought under the GST ambit,” said a government official.

According to the anti-profiteering rules under GST, “benefits of input-tax credit should have been passed on to recipients by way of commensurate reduction in prices”. The authority is still catering to complaints related to the rate reductions made in July last year on a number of consumer durables and on 178 items in November 2017.

With GST shortfall in 2018-19, the Council would also discuss ways to improve revenue by preventing leakages. In April, the collections crossed ~1 trillion for the third time in four months.

“The next GST Council meeting could chart out agenda for the next year or so. Aspects like e-invoicing and other measures to plug tax leakages, timelines for new compliance mechanism to be implemented, further rate rationalisation, and industry-specific issues such as those pertaining to solar industry may be discussed, along with few legislative changes,” said Pratik Jain, partner, PwC India.

The Council will also take up the report by the group of ministers led by Maharashtra Finance Minister Sudhir Mungantiwar, which has favoured a uniform GST rate of 18 per cent or 28 per cent on state-sponsored and state-authorised lotteries. The SGST rate on state-organised lottery could be retained to either 18 per cent or 28 per cent. While the GST rate on state-authorised lottery would be retained at 28 per cent or brought down to 18 per cent. “Kerala is not in favour of reducing rate on sate-authorised lotteries, while Maharashtra, Punjab and Assam are keen,” said a government official.

Besides, the Council may consider levying GST on extra neutral alcohol (ENA), which is a key ingredient of alcoholic beverages and medicines. The proposal is to levy an 18 per cent GST on ENA as the pharma industry is unable to avail input-tax credit on the same. Alcohol for consumption and potable alcohol is constitutionally out of GST, whereas its input — ENA — had been a grey area. Industrial alcohol is within GST. The Centre has taken a view of additional solicitor general, who has pointed out that ENA is liable to GST as it is not potable alcohol.

Abhishek Jain, tax partner, EY, said that the Council is also expected to deliberate and decide on inclusion of excluded sectors like oil & gas, real estate (constructed properties), electricity, etc, and rate rationalisation on cement.

Source: Business-Standard.

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GST Council may consider national bench of AAAR next month

GST Council may consider national bench of AAAR next month

The GST Council is likely to consider next month a proposal for setting up a national bench of the Appellate Authority for Advance Ruling (AAAR) to reconcile the contradictory orders on similar issues passed by AARs in different states, a move aimed at providing certainty to taxpayers.

Sources said the revenue department is mulling on the idea of a national bench of AAAR since it feels that the Authority for Advance Ruling (AAR) mechanism in its current form is not serving its objective of providing certainty to taxpayers under the Goods and Services Tax (GST) regime.

“There has been a view that a second Appellate Authority for Advance Ruling needs to be set up. It would be a national bench only to reconcile divergent verdicts passed by state AARs. We will present the proposal before the GST Council, which is expected to meet in June,” an official told PTI.

The AARs in different states have passed about 470 orders, while AAARs have disposed of around 69 cases till March 2019.

Out of the orders passed by AARs, contradictory orders were passed in about 10 cases, a couple of which were later clarified by the Central Board of Indirect Taxes and Customs (CBIC).

The official further said the GST law would have to be amended for setting up a second appellate authority since the Act in its present form does not provide for a centralised authority.

Setting up of a national bench of AAAR would help bring certainty in the GST era as divergent rulings by AARs leave the industry flummoxed about the tax implication of a particular business decision.

“The composition of the national bench of AAAR would be decided after the states agree to the proposal,” the official added.

In view of the confusion created by contradictory rulings, the revenue department had last year too mooted a proposal to set up a centralised appellate authority for advance ruling to bring uniformity in such cases.

The GST Council, chaired by Union Finance Minister and comprising state counterparts, was scheduled to discuss it in its meeting in July 2018. However, the council did not arrive at a decision on the agenda item.

Under the GST law, each state is required to set up an Authority for Advance Ruling (AAR) comprising one member from the central tax department, and another from the respective state.

An aggrieved party can file an appeal against an order of the AAR to the AAAR within a period of 30 days, which may be further extended by a month.

The appellate authority has two members — the Chief Commissioner of Central Tax as designated by the CBIC and the Commissioner of State Tax.

The appellate authority has been mandated to pass order within 90 days of the filing of an appeal.

Industry is of the view that since both the AAR and AAAR only have tax officers as members, the ruling is most cases is tilted towards the revenue side.

The New Delhi bench of the AAR had in March last year held that duty-free shops at airports are liable to deduct GST from passengers. However, these shops were exempt from service tax and Central Sales Tax in the earlier regime. This had created a flutter in the industry.

Similarly, the solar industry too was left in a vexed situation when the Maharashtra AAR said that 18 percent GST rate would be levied for installation works, but the Karnataka bench of AAR passed an order levying 5 percent GST on the same.

Also, the AARs in Tamil Nadu and Gujarat had passed divergent orders on applicability of GST on catering services in an industrial/office unit, which was later clarified by the CBIC through a circular.

Besides, there were contradictory orders passed by AARs in different states on levy of GST on payment made by breweries to brand owner, availability of Input Tax Credit (ITC) on cess paid and also whether ITC is admissible when the recipient settles the payment through a book adjustment.

AMRG & Associates Partner Rajat Mohan said: “A National Bench/ Regional Benches needs to be implanted in the quasi-judicial decision-making process of AAR so that decisions of the lower authority could be re-calibrated by a higher centralised authority freeing them from revenue bias and passing on relief of certainty by preserving a nation-wide single line of verdicts.”

Source: Money Control.

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GSTR 9 – Annual GST Returns Riddle

GSTR 9 – Annual GST Returns Riddle

Every registered entity is required to file annual return for goods and services tax (GST) by December of the next year. Since the form was not ready in time, the original due date of December 2018 is now extended up to 30 June 2019.

Registered persons, with more than Rs2 crore turnover, have to file GST reconciliation statement and certification (GSTR 9C) as well as annual returns or GSTR9 and audited financial statements. GSTR 9C is required to be certified by a chartered accountant (CA).

GST annual returns or (GSTR9) is a summary of details already reported in GSTR1 (sales returns) and GSTR3B (monthly/ quarterly), i.e., summary of sales and purchases along with tax payments. This, in theory, looks very simple as one-nation-one-tax GST; but when we try to actually fill the returns, there are multiple issues for which no clarifications are available or there are different interpretations by professionals. A few examples are given below:

1. In GSTR9, adjustments or amendments up to September 2018 are asked to be reported. However, the Central Board of Indirect Taxes and Customs (CBIC) has already extended this date up to March 2019. Consequent changes in the form are yet to be made.

2. Table 4 of GSTR9 asks for details of advances, inward and outward supplies made during the financial year on which tax is payable. This data is auto-populated as per GSTR1 filed. However, if some sales are not reported in GSTR1 but tax is already paid through GSTR3B then where to report it is not clarified.
3. The FAQs on this matter issued by CBIC read as under:

“In Form GSTR-9, can additional liability not reported earlier in Form GSTR-3B be declared? Yes, additional liability not reported earlier at the time of filing Form GSTR-3B can be declared in Form GSTR-9. The additional liability so declared in Form GSTR-3B is required to be paid through Form GST DRC-03.”

First of all, it should be GSTR9 and not GSTR3B in line 3. Further, it just information NOT info known but does not say which table and where to declare this liability.

4. Input reversals done in GSTR3B are shown as utilisation of input tax credit (ITC) in auto-populated table 9. Further, this field in not editable.

5. Headings of table 11 and 12 say that “Details of the previous financial year’s transactions reported in next financial year” are to be shown there. However, there is difference in language used in the help file and line item. The help file says, “Particulars for the previous FY transactions declared in returns of April to September of next FY or up to date of filing of annual returns for 2017-18, whichever is earlier.” Whereas individual line item for table 11 and 12 talks only about GSTR1. Now there is confusion as to whether changes made in GSTR3B in the next financial year can be reported here. There is no other table to report these changes either.

6. For those who are not supposed to file audit report in 9C, there is confusion about whether GSTR9 should be based only on returns filed or books of accounts. There is no mention of books of accounts anywhere in GSTR9 frequently asked questions (FAQs).

7. On tax paid on reverse-charge basis, in subsequent financial year through GSTR3B, where does one report in GSTR9? There are no final answers to this. If reported along with normal turnover, it will not match with books of accounts.

8. Table 7 of GSTR9 says, ITC reversed for the financial year is to be disclosed. However, it does not specify in which returns. If reversed during 2018-19 for 2017-18 then it may lead to double reduction while filing next year’s GSTR9.

9. Table 8 of GSTR9 about ITC related information has no column for IGST on import paid but goods still in bonded warehouse, hence credit not taken. Many persons have not taken this credit till goods are cleared. If we follow as per GSTR9 schema, this credit will lapse.

10. The harmonised system of nomenclature (HSN) wise summary of inward supplies where 10% or more of total inward supply is to be given. However, if the supplier has not provided the exact HSN code, it would be very difficult for the taxpayer to now search for it.

These are some of the issues that taxpayers are facing while filing GSTR9 annual return. There are many such issues in GSTR9C audit report form as well. The main issue is that the government has been very slow in giving clarifications and, since returns filed cannot be revised, people are waiting till the last date to file. We all know what happens to GSTN in the last few days of any due date.

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Source: Money Life.
(CA Nikhil Vadia has over 20 years of experience in direct and indirect taxation, internal audit, systems review and management consultancy.)
GST: Homebuyers To Pay 12% GST On Balance Due If Completion Certificate Issued By March 31

GST: Homebuyers To Pay 12% GST On Balance Due If Completion Certificate Issued By March 31

Homebuyers will have to pay 12 percent Goods and Services Tax on balance amount due to the builder if the housing project has been granted completion certificate by March 31, 2019, the Central Board of Indirect Taxes and Customs has said.

Builders who have received a completion certificate for an ongoing project before April 1, 2019, will have to charge 12 percent GST from buyers on the balance amount due towards the purchase of the flat.

Issuing the second set of FAQs for real estate sector, the CBIC said that builders will not be able to adjust the accumulated credits in ongoing projects in case they opt for lower new GST rate of 5 percent for normal and 1 percent for affordable housing.

The first set of FAQs for real estate sector was issued last week to clarify doubts with regard to migration of real estate developers to new GST rates for the sector which has come into force from April 1, 2019.

The GST Council, headed by Finance Minister Arun Jaitley and comprising state counterparts, had in March allowed real estate players to shift to 5 percent GST rate for residential units and 1 percent for affordable housing without the benefit of the input tax credit from April 1, 2019.

For the ongoing projects, builders have been given the option to either continue in 12 per cent Goods and Services Tax slab with ITC (8 percent for affordable housing), or opt for 5 percent GST rate (1 percent for affordable housing) without ITC and communicate to their respective jurisdictional officers the same by May 20.

To a query on what shall be the rate of GST applicable on projects in respect of which occupation certificate has been issued prior to April 1 but the balance demands are pending, the FAQ said: “Time of supply of the service by way of construction of apartments in such projects falls prior to April 1, 2019, and accordingly the rates as existed prior to April 1, 2019, would apply to such balance demands.”

AMRG & Associates Partner Rajat Mohan said, “This clarification has tightened the grip on taxpayers who intended to take benefit of lower taxes rates with the aid of deferred invoicing.”

On whether accumulated ITC can be adjusted against new tax liability of 5 percent and 1 percent, the FAQ said: “No. GST on services of construction of an apartment by a promoter at the rate of 1 percent/ 5 percent is to be discharged in cash only. ITC, if any, may be used for discharging any other supply of service.”

“Developers opting for new tax regime for ongoing projects now has another reason to refrain from new scheme,” Mohan said.

The CBIC further clarified that exempted goods procured by a builder under the new tax regime would not be counted within the 80 percent limit set for procurement from registered dealers.

“This could entail an additional tax of 18 percent on value of exempt supplies, credit of which would not be available to developers,” Mohan added.

While deciding on lower GST rates for real estate sector, the Council had said that at least 80 percent of the inputs should be procured from registered dealer.

The CBIC has also clarified that developer and not the land owner will have the right to decide whether to opt for new GST rates or stick to old rates for ongoing projects.

EY Tax Partner Abhishek Jain said: “Clarifications on some technical ambiguities like non-applicability of new rates for projects completed before April, 2019, valuation of TDR, etc should help resolve some involved issues for this sector.”

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Source: Bloomberg Quint.
Deadline for filing April GST sales returns extended by a month for 14 districts in Odisha

Deadline for filing April GST sales returns extended by a month for 14 districts in Odisha

The Finance Ministry has extended the deadline for filing summary sales return for April in 14 districts of Odisha affected by cyclone Fani by a month till June 20.

Similarly, the due date for filing final sales return or GSTR-1 for April for taxpayers having aggregate turnover more than Rs 1.5 crore too has been extended by a month till June 10.

In two separate notifications, the Central Board of Indirect Taxes and Customs (CBIC) said that these extended deadlines for filing April returns would be for registered taxpayers whose principal place of business is in the districts of Angul, Balasore, Bhadrak, Cuttack, Dhenkanal, Ganjam, Jagatsinghpur, Jajpur, Kendrapara, Keonjhar, Khordha, Mayurbhanj, Nayagarh and Puri in the state of Odisha.

The due date for filing summary sales return GSTR-3B and GSTR-1 for April was earlier notified as May 20 and May 11, respectively.

However, the CBIC notification extends this deadline of GSTR-3B and GSTR-1 for the specified 14 districts in Odisha to June 20 and June 10, respectively.

Odisha was hit by “extremely severe” cyclonic storm Fani earlier this month, which has left 64 dead and at least 241 people injured in the state.

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Source: Business-Standard.
GST Anti-Evasion Unit Goes After Car Dealers For Retrospective Tax

GST Anti-Evasion Unit Goes After Car Dealers For Retrospective Tax

The government has questioned the goods and services tax anti-evasion unit for demanding retrospective tax from automobile dealers on discounts received from manufacturers to boost sales, according to a person aware of the development.

The Central Board of Indirect Tax Customs considers such transactions as a discount and not a service, the person told BloombergQuint on the condition of anonymity.

The Mumbai team of the Directorate General of Goods and Services Tax Intelligence issued show-cause notices to 40 dealers, including sellers of Maruti Suzuki India Ltd. and Hyundai Motor India Ltd.’s vehicles, asking them to pay Rs 83 crore as tax since July 1, 2012, the person quoted above said.

According to the GST intelligence body, discounts given to dealers or distributors were used for promotional activities and were liable for service tax payment, the person said. The agency, the person said, wants to tax dealers based on the interpretation that they are providing a service to car manufacturers.

Sumit Lunker, indirect tax partner at PwC India, however, told BloombergQuint that if an amount is being offered as a discount by the seller, it cannot be considered as a service offered by the recipient. Maruti Suzuki and Hyundai India have yet to respond to BloombergQuint’s emailed queries.

Secondary Discounts

According to the person quoted earlier, the GST probe agency also asked distributors to pay tax on post-sale discounts—not part of the original sale when the vehicles are sent to dealerships but offered later as an incentive to clear inventory.

Against such discounts, according to the GST law, manufacturers have to issue credit notes to dealers, and pay the tax on the entire amount including the discount. But the GST probe agency also asked the dealers to pay tax on such discounts, calling it a service to advertise or promote the manufacturers’ brand, the person said. And it raised the demand since 2012.

The government, however, said the intelligence body wrongly interpreted the GST law to raise a service tax demand retrospectively when the GST was not even implemented, the person said.

Udit Gupta, partner at law firm Udit Kishan & Associates, agreed. “No tax demand can be raised under the CGST Act for a period prior to July 2017,” he said. “Such demand is not legally tenable and will disrupt The taxman, he said, should avoid such proceedings.

Has Wider Implications

The issue has widespread implications as similar practices are prevalent among consumer goods makers, according to the person quoted above. The industry needs to be informed about the correct legal position and the stand of the government to avoid litigation, the official said.

In March this year, the government had clarified that consumer goods makers need not pay tax on promotional offers like ‘buy one get one free’. This came after the intelligence body asked these companies to pay tax on goods provided for free in promotional offers.

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Source: bloomberg Quint.

Businesses can apply for revoking cancellation of GST registration by July 22: CBIC

Businesses can apply for revoking cancellation of GST registration by July 22: CBIC

The revenue department has allowed businesses whose GST registration has been cancelled due to non-filing of tax returns to apply for its revocation by July 22, provided they file their pending returns and pay due taxes.

In a letter to field offices, the Central Board of Indirect Taxes and Customs (CBIC) said it is providing a “one-time opportunity” to apply for revocation of cancellation of GST registration by July 22, 2019, for the those entities for whom cancellation order has been passed up to March 31, 2019.

The CBIC said where the registration has been cancelled with effect from the date of the order, all returns due till the date of such cancellation are required to be furnished before the revocation application is filed.

In cases where the registration has been canceled with retrospective effect, the CBIC has allowed filing of revocation application, subject to the condition that all returns relating to the period from the effective date of cancellation till the date of revocation order will be filed within a period of 30 days from the date of the revocation order.

The CBIC officers have recently canceled a large number of registrations on account of non-compliance, including non-filing of returns.

Earlier this month, the CBIC had asked its field officers to be cautious while processing an application for fresh GST registration by those businesses whose earlier registration has been cancelled due to non-compliance, as it sought to crack down on tax evaders.

The CBIC missive came after taxmen noticed that businesses whose registration has been cancelled continue to operate without any registration and are not applying for revocation and are instead applying for fresh registration, so as to evade taxes which were due under earlier registration.

About 1.2 crore businesses are registered under Goods and Services Tax (GST), which was rolled out on July 1, 2017.

AMRG & Associates partner Rajat Mohan said: “Numerous MSME sector taxpayers are expected to take benefit of this opportunity who unknowingly stepped on the wrong side of tax laws and were served with punitive cancellation orders”.

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Source: Retail.Economic Times

Non-filers of GST returns for 2 months to be barred from generating e-way bills from June 21

Non-filers of GST returns for 2 months to be barred from generating e-way bills from June 21

Non-filers of GST returns for two straight months will be barred from generating e-way bills for transporting goods effective June 21, the finance ministry said.

Businesses under GST composition scheme, however, will be barred from generating e-way bill if they fail to file tax returns for two consecutive filing periods, which is six months.

The Central Board of Indirect Taxes and Customs (CBIC) has notified June 21, 2019, as the day from which any “consignor, consignee, transporter, e-commerce operator or courier agency” would be barred from generating electronic way or e-way bill for failure to file tax returns for the stipulated time period as mentioned in the GST rules.

As per rules, a composition scheme taxpayer who has not furnished the returns for two consecutive tax periods and a regular taxpayer who has not filed returns for a consecutive period of two months would be restricted from generating e-way bill.

In the Goods and Services Tax (GST) regime, businesses have to file monthly tax returns by the 20th day of the subsequent month. However, businesses opting for composition scheme have to file quarterly returns by the 18th day of the subsequent month following the end of a quarter.

The Goods and Services Tax Network (GSTN) has put in place the IT system so that businesses which have not filed tax returns for the stipulated period would be barred from generating e-way bills.

The move, officials believe, would help check GST evasion. During April-December, there were 3,626 cases of GST evasion/violations, involving Rs 15,278 crore.

Touted as an anti-evasion measure, e-way bill system was rolled out on April 1, 2018, for moving goods worth over Rs 50,000 from one state to another. The same for intra or within the state movement was rolled out in a phased manner from April 15.

Transporters of goods worth over Rs 50,000 would be required to present e-way bill during transit to a GST inspector if asked.

With almost two years into GST implementation, the government is now focussing on anti-evasion measures to shore up revenue and increase compliance.

AMRG & Associates Partner Rajat Mohan said with this supplier, transporters and e-commerce operators would be forced not to sell or transport goods to non-filers

“E-commerce, logistics, FMCG companies, and businesses working on the franchise model, would have to immediately develop and implement an automated workflow whereby defaulting business partners are moved out from the supply chain on a real-time basis,” Mohan said.

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Source: Economic Times.
GST Council recalls rule that raised tax outgo of large companies

GST Council recalls rule that raised tax outgo of large companies

The Goods and Services Tax (GST) Council has recalled the limits placed on companies from February this year on settling their tax liability with credits for taxes paid previously on raw materials and services. The move comes after businesses said the restrictions had led to an increase in their tax outgo.

In a clarification issued to field officers on Tuesday, the Central Board of Indirect Taxes and Customs (CBIC) has granted full flexibility to businesses in using the credits for taxes paid on inter-state transactions (integrated GST or IGST) in settling the liability towards GST payable to the Union or state governments. The limitations introduced from February had forced companies to use IGST credits in a certain order that limited their ability to manage their final tax outgo with the tax credits available on the ledger. This, companies have said, led to increased cash outgo in certain scenarios to meet their tax liability while unused tax credits remained on their books.

The CBEC clarification explained that credits from paying taxes on interstate transactions (for raw materials and services) can be used for setting off the GST liability to the central or state governments in any order or in any proportion. The only rider is that if finished goods move across state borders, the IGST credit should first be utilized for settling that liability and the surplus could be used for meeting the tax liability towards central or state GST.

The GST Council introduced the restrictions in February as IGST credit remaining on records was going up, which the tax authorities wanted companies to use up. Experts said the latest clarification offered relief to companies. “This was a much-needed clarification, as this should help bring to rest the varied interpretation apprehended by industry experts on the utilization of IGST credit,” said Abhishek Jain, tax partner, EY.

The restrictions on use of tax credits was affecting big companies as they have large value chain across states and have large amounts of input tax credits on their ledger on account of transactions across state borders. The flexibility to use credits from inter-state transactions is a relief for businesses as it is more fungible and can be utilized for meeting tax liability. On the other hand, credits from CGST and SGST payment cannot be cross-utilised.

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Source: Live Mint.