GST: A Note on Applicability of Sec 49A - New offset method

CA Premanshu Jaiswal 
on 22 July 2019


An Analysis on Change of Offsetting Mechanism of GST Liability and Credit -

Sec 49 provides for Payment of tax, interest, penalty and other amounts under the CGST Act.

Clause 5 of Sec 49 provides the manner for offsetting liabilities with input tax credit and order therein. i.e. Old method.

Sec 49A was inserted vide CGST Amendment Act, 2018 to be effective from the date of notification issued later. Reads as under –

49A. Utilisation of input tax credit subject to certain conditions.

Notwithstanding anything contained in section 49, the input tax credit on account of CGST, SGST or UGST shall be utilized towards payment of IGST, CGST, SGST or UGST, as the case may be, only after the input tax credit available on account of IGST has first been utilised fully towards such payment.

Vide Notification No. 2/2019-Central Tax Dated 29.01.2019 effective date mentioned as 01.02.2019.

Hence, the old method prescribed under Sec 49 is overridden by the conditions mentioned in Sec 49A from Feb 2019.

However, while filing returns for the month of Feb 2019, the GST portal was not allowing the new method, hence the industry followed the old method amongst opposing representations filed before the government in first place for this change.

In the quest to address the industry concerns and to bring more clarity on the new method, Rule 88A was inserted in April 2019 to allow IGST credit left in excess after IGST liability set off, to be adjusted with CGST or SGST in any manner of priority.

It was further clarified vide Circular No. 98/17/2019-GST Dated 23.04.2019 that during then, the common portal supports the order of utilization of input tax credit in accordance with the provisions before the implementation of Sec 49A i.e. old method. Therefore, till the new order of utilization as per newly inserted Rule 88A is implemented on GST portal, taxpayers may continue to utilize their input tax credit as per the functionality available on the common portal.

On 07.06.2019, GSTIN Portal’s official twitter account announced that the new method shall be available on GST Portal from 11.06.2019, to be applicable for filing May 2019 Returns. However, on 14.06.2019 the said message was recalled. Hence, May 2019 returns did not apply new method.

However, as per recent activity on GST portal it is now known that new method of offset is available as default on GST portal, but there absence of official communication on the GST portal or GSTIN (twitter account) etc. There has been divided opinion on the matter as returns have been filed by taxpayers accepting offset in both the methods.

Hence the question before us is that, should we wait for a clarification/instruction from the Dept. for announcing an effective date for adopting the new method or the reading of relaxation allowed to follow Sec 49A r/w Rule 88A vide the impugned Circular dated 23.04.2019 shall be self-construing to prescribe the effective date on new method effective from June 2019 3B returns.


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