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Carry forward of CENVAT Credit 2

Blog Post created by www.withdia.com Your Intelligent Assistant on May 23, 2017

In this blog, we look at a query on possible carry forward of accumulated CENVAT credit as CGST credit, and no SGST credits while SGST would be payable on future supplies.

 

Query:

As part of the transitional credits, unutilised CENVAT credits would be carried forward as CGST credit only, and if the company has local supplies (intra-State), it would be liable to pay CGST and SGST. While it would use the balance of credit in CGST, SGST would be a cash outflow - how should one manage this?

 

Response:

Yes, the above situation would result in a case of carry forward of CGST credit balance and a payable (cash outflow) of SGST. This would arise only in cases where the company would effect local / intra-State supplies. Nevertheless, this would not apply if the purchases during the post GST period (till such time the CGST balance is exhausted) are largely inter-State. In such a situation, the credit that would accrue on inward supplies would be IGST which can be fully utilised for payment of SGST on local supplies – this would also ensure that the CGST balance does not further accumulate.  

 

Additional Comments: Would not apply if the supplies are inter-State, since such supplies would be liable to IGST and CGST balance can be completely utilised for payment of IGST.

 

Author: N R Badrinath

 

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