Section 18 of The Integrated Goods and Services Tax Act, 2017
On utilisation of credit of integrated tax availed under this Act for payment of,--
- (a)central tax in accordance with the provisions of sub-section (5) of section 49 of the Central Goods and Services Tax Act, the amount collected as integrated tax shall stand reduced by an amount equal to the credit so utilised and the Central Government shall transfer an amount equal to the amount so reduced from the integrated tax account to the central tax account in such manner and within such time as may be prescribed;
- (b)Union territory tax in accordance with the provisions of section 9 of the Union Territory Goods and Services Tax Act, the amount collected as integrated tax shall stand reduced by an amount equal to the credit so utilised and the Central Government shall transfer an amount equal to the amount so reduced from the integrated tax account to the Union territory tax account in such manner and within such time as may be prescribed;
- (c)State tax in accordance with the provisions of the respective State Goods and Services Tax Act, the amount collected as integrated tax shall stand reduced by an amount equal to the credit so utilised and shall be apportioned to the appropriate State Government and the Central Government shall transfer the amount so apportioned to the account of the appropriate State Government in such manner and within such time as may be prescribed. Explanation.--For the purposes of this Chapter, “appropriate State” in relation to a taxable person, means the State or Union territory where he is registered or is liable to be registered under the provisions of the Central Goods and Services Tax Act.
Summary
- When a business uses its integrated tax credit to pay central tax, the integrated tax pool is reduced, and the Central Government transfers that exact amount to the central tax account.
- When a business uses integrated tax credit to pay Union territory tax, the integrated tax pool is reduced, and the Central Government transfers that exact amount to the Union territory's tax account.
- When a business uses integrated tax credit to pay State tax, the integrated tax pool is reduced, and the Central Government must transfer that exact amount to that specific State Government's tax account.
- The "appropriate State" is defined as the State or Union territory where the taxpayer is registered or is required to be registered under the central tax law.
- All of these credit-related fund transfers must be done in the specific manner and within the time limits set by the rules.
Practical examples
FAQ
1. What is input tax credit?
Input tax credit is the tax a business paid on its purchases, which it can deduct from the tax it owes on its sales.
2. What happens when integrated tax credit is used to pay central tax?
The amount of integrated tax collected is reduced by that amount, and the Central Government transfers that money from the integrated tax account to the central tax account.
3. How does the government know which State to send the money to when a taxpayer uses credit to pay State tax?
The money is transferred to the "appropriate State," which is the State or Union territory where the taxpayer is registered or is legally required to be registered.
Test yourself
Q1.Under Section 18 of The Integrated Goods and Services Tax Act, 2017, when a taxpayer uses integrated tax credit to pay central tax, what action must the Central Government take?
Q2.Under Section 18 of The Integrated Goods and Services Tax Act, 2017, what does the term "appropriate State" mean in relation to a taxable person?
Q3.Under Section 18 of The Integrated Goods and Services Tax Act, 2017, when a taxpayer uses integrated tax credit to pay State tax, to whom does the Central Government transfer the corresponding funds?
Q4.Under Section 18 of The Integrated Goods and Services Tax Act, 2017, what happens to the total amount of collected integrated tax when a taxpayer utilizes integrated tax credit to pay Union territory tax?
Q5.How does Section 9 of The Integrated Goods and Services Tax Act, 2017, which covers supplies in territorial waters, interact with the transfer of credit funds under Section 18 of the Act?
Q6.Under Section 18 of The Integrated Goods and Services Tax Act, 2017, using integrated tax credit to pay Union territory tax must be done in accordance with which law?