This circular provides clarification on the manner of utilisation of input tax credit (ITC) following the insertion of Rule 88A in the CGST Rules, 2017, with effect from 1 February 2019.

The circular explains that Rule 88A has been inserted to remove ambiguity and provide flexibility in the order of utilisation of ITC. It clarifies that ITC of integrated tax (IGST) shall first be utilised for payment of IGST liability. After exhausting IGST liability, the balance IGST credit can be utilised either for payment of central tax (CGST) or state tax/union territory tax (SGST/UTGST), in any order and proportion, as per the choice of the registered person.

Further, the circular reiterates that ITC of CGST can be utilised only for payment of CGST and IGST, and ITC of SGST/UTGST can be utilised only for payment of SGST/UTGST and IGST, in that order, as prescribed under section 49 of the CGST Act. Cross-utilisation between CGST and SGST/UTGST is not permitted.

It is also clarified that the insertion of Rule 88A does not alter the existing provisions relating to utilisation of CGST and SGST/UTGST credits, but only provides a clear mechanism for utilisation of IGST credit to avoid disputes and ensure uniform implementation.

This clarification is intended to streamline ITC utilisation and reduce interpretational issues faced by taxpayers and field formations.