Availment and Utilization of ITC:
As per the provisions contained in section 16(11) of the MGL, filing of return by the recipient is one of the important conditions for availing the ITC. Section 28 r/w section 35(2) of the MGL (section 7 (2) of the IGST Act) provides that the ITC, as selfassessed, would be credited to the electronic credit ledger of the recipient on a provisional basis. Provisions contained in section 29 of the MGL provides that the ITC would be confirmed only if the inward details filed by the recipient are matched with the outward details furnished by the supplier in his valid return. In case of mismatch between the inward and outward details, the supplier would be required to rectify the mis-match within a period of two months and if the mis-match continues, the ITC would have to be reversed by the recipient. Proviso to section 28 of the MGL also provides that the recipient can avail the ITC but cannot utilize the same unless he also discharges his self-assessed tax liability.
A combined reading of all these provisions indicates that the recipient can avail the ITC, on provisional basis, immediately on receipt of goods and / or services but the ITC will have to be reversed after a period of two months if the outward and inward supply details are not matched. The said matching would happen only when both the supplier and the recipient have uploaded the respective outward and inward supply details, the supplier has filed his valid return and the recipient has filed his return. It is only after such matching has taken place that the ITC allowed on provisional basis would be confirmed.
Section 35(4) of the MGL (section 7(4) of IGST Act) provides that ITC can be used only for payment of tax, and not for any other liability like interest, penalty, fee.
Section 35 (5) of the MGL (section 7 (5) of IGST Act) provides the manner in which the ITC can be utilized. The permitted combinations are as follows:
(a) The amount of ITC of IGST available in the electronic credit ledger shall first be utilized towards payment of IGST and the amount remaining, if any, may be utilized towards the payment of CGST and SGST, in that order.
(b) The amount of ITC of CGST available in the electronic credit ledger shall first be utilized towards payment of CGST and the amount remaining, if any, may be utilized towards the payment of IGST.
(c) The amount of ITC of SGST available in the electronic credit ledger shall first be utilized towards payment of SGST and the amount remaining, if any, may be utilized towards the payment of IGST.
It has also been provided that cross-utilization of CGST and SGST credit is not allowed.
The unutilized ITC can be claimed as refund in two situations namely, export of goods or services and in case of inverted tax structure [section 38 (2)]. In case of exports also, no refund of unutilized ITC is allowed where goods are subjected to export duty. In all other cases, unutilized ITC can be carried forward.