In GST, for registered user under the same PAN, Input Tax Credit of One state cannot be set off against tax liability in another state. Other state under same PAN In GST cannot utilise Input Tax Credit of One state for payment of GST Tax liability as per the new ruling.
The act does not contain any clear provisions for set off of credit availed in one state against the tax payable in other states for the registered person under the same PAN.
However, after the careful analysis of Sec 16, Sec 20, Sec 49(5), and Sec 51 of CGST Act, we can find out some reasons why the registered person under the same PAN cannot set off the input tax against the tax liability in the other state.
One state under same PAN In GST cannot utilise Input Tax Credit of Other state for payment of GST Tax liability as per the new ruling. Let’s read about it.
Utilization of credit under Sec 49(5) of CGST Act-
- Firstly, the integrated tax shall be paid from the integrated tax and the remaining amount, if any, can be utilized towards the payment of Central Tax, State Tax or Union Territory Tax;
- Secondly, Central Tax shall be paid from the Central Tax and the remaining amount, if any, can be utilized towards the payment of integrated Tax.
- Thirdly, State Tax shall be paid from the State Tax and the remaining amount, if any, can be used towards the payment of integrated tax;
- Fourthly, Union Territory tax shall be paid from the Union Territory tax and the remaining amount, if any, can be utilized towards the payment of integrated tax;
One should keep in mind that for the payment of State tax or union territory tax central tax cannot be utilized and for the payment of central tax, the State tax or Union territory tax cannot be utilized.
Below are the reasons why credit cannot be utilized outside the state.
1. Sec 16 of CGST Act provides-(a) no registered person shall be entitled to the credit of any input tax in respect of any supply of goods or services or both to him unless, he is in possession of a tax invoice or debit note issued by a supplier registered under this Act, or such other tax paying documents as may be prescribed.
(b) he has received the goods or services or both
No Document has been prescribed to facilitate transfer and booking of credit without receiving of goods/ service or both and invoice.
2. As per Sec 20 of CGST Act, ISD cannot distribute the credit of one state to another state. Credit has to be distributed by ISD to the state where the inputs have been used for the supply of goods or services.
3. As per Sec 51 of CGST Act, if the Place of supply and the location of the supplier is in a State which is different from the State of registration of the recipient, deduction of TDS shall not be made.
4. Tax liability from the input tax credit of one state cannot be allowed to set off with the other state; this will result in the reduction of revenue of that state
5. Input tax credit has to be transferred to another state to utilize the Input tax credit of one state. There is no such provision in IGST and CGST Act which allow the transfer of credit to other registered person having registration in the different state under same PAN.
6. Registration has a vital role in GST Scheme. One has to register in every state from where he/she has made the supply of goods or services or both and had to file the return by registration in every state.
7. As per Sec 24 of CGST Act the person having different registration under Same PAN to be treated as distinct person
Therefore after careful analysis of Sec 49(5) and other above provisions, we conclude that GST is state and registration specific. Hence, input tax of one state cannot be utilized to set off against the tax payable in another state.