Big Relief to Industry Claiming Budgetary Support under GST

n  By Keshav R Garg

Notification No. 16/2019- Central Tax dated 29.03.2019 will prove to be a life saving drug for most of the industries claiming budgetary support under the scheme of  DIPP after GST was enforced. The industries which were enjoying excise exemption vide notification 49/50-2003 were offered budgetary support post GST implementation. As per this scheme these industries were eligible to claim 29% of IGST and 58% of the CGST actually paid by them to the government.

Since most of the industries procured inputs/input services/capital goods from out side the state, they had huge IGST credit available with them. It was also true that majority of such industries sold their output within the state itself. This meant that their output liability resulted into CGST and SGST paid by them. Since as per the set-off mechanism the IGST credit accumulated on purchase was first utilised against CGST liability and then with SGST. In most of the cases industries enjoying budgetary support landed up paying SGST. As we know no budgetary support was available on SGST paid by such industry.

Notification No. 16/2019- Central Tax dated 29.03.2019 vide clause 5 has added Rule 88A which now prescribes that after knocking of IGST liability against IGST credit, balance credit can be utilised either towards CGST or SGST. This means that industry will now has option to utilise IGST either against CGST or SGST. In these circumstances Industry will prefer to knock off IGST against SGST and pay CGST liability in cash, resulting into 58% being given back to them in form of budgetary support. Let us understand this by following illustration:

Manner of set-off before amendment	Manner of set-off after amendment
IGST	IGST
CGST	Either CGST or SGST
SGST

	Old Rule		New Rule 88A
	CGST	SGST	CGST	SGST
(Assumed IGST Credit of Rs. 1 crores after knocking of IGST liability is available)
Liability  (a)	7,500,000	7,500,000	7,500,000	7,500,000
IGST Utilisation (b)	7,500,000	2,500,000	2,500,000	7,500,000
Tax To be paid in Cash (a-b)	-	5,000,000	5,000,000	-
Budgetary Support	-	-	2,900,000	-
Net Tax Paid	-	5,000,000	2,100,000	-

The new rule also provides that CGST/SGST credit shall only be utilised for CGST/SGST liability as the case may be when full IGST credit is exhausted/utilised. Further it is important to note that the government is yet to prescribe the effective date of applicability of new rule 88A of Central Goods and Services Tax Rule 2017. In case of industries other than those availing budgetary support we feel that this change will merely bring convenience in utilisation of taxes instead of any monetary gains to them.

Regards

CA. Keshav R Garg

+91-98880-90008

keshavgarg@kdai.in

3328, F Floor, Sector 27 D, Chandigarh, India 160 019