Both receipt and supply of goods and services in same State :
When both receipt and supply of goods and services is in the same State, the mechanism of input tax will work as follows.
Illustration- Value of supply of goods and services – Rs 1,200. SGST and CGST rate on supply of goods and services is10% each. Value of receipt of goods and services – Rs 1,000. SGST and CGST rate on receipts is 10% each.
Details SGST CGST
Tax payable on supply of goods and services of Rs 1,200 72 72
Input tax credit of taxes paid on input goods and services of Rs 1,000 available in Electronic Credit Ledger 100 100
Net tax payable by cash by the dealer in Electronic Cash Ledger Nil Nil
Excess credit 28 28
Excess credit due to difference in GST rates is termed as difference due to ‘inverted duty structure’. In some cases, provision may be made for refund of such excess credit.
If there is no such provision and if the excess credit of Rs 28 each of SGST and CGST cannot be utilized in any normal course of business in any near future, due to rate difference between GST rate on inputs and GST rate of outputs, the excess credit should be written off to profit and loss account. If it is not so written off, the profit will be over-stated to that extent.
The excess credit of Rs 28 can be carried forward in Electronic Credit Ledger.
Illustration – Value of supply of goods and services (50% sold out of goods purchased) – Rs 600. SGST and CGST rate on supply of goods and services is 10% each. Balance 50% is in stock. Value of receipt of goods and services – Rs 1,000. SGST and CGST rate on receipts is 10% each.
Details SGST CGST
Tax payable on supply of goods and services of Rs 1,200 60 60
Input tax credit of taxes paid on input goods and services of Rs 1,000 available in Electronic Credit Ledger 100 100
Net tax payable by cash by the dealer in Electronic Cash Ledger Nil Nil
Excess credit 40 40
One to one relation is not required in GST provisions. Thus, entire input tax credit is available even if only 50% of the goods are sold. The excess credit of Rs 40 each of SGST and CGST can be carried forward in Electronic Credit Ledger and utilized in subsequent period.
Illustration- Supply of goods and services within India- Rs.800. Exports of goods and services Rs 400. SGST and CGST rate on supply of goods and services is 10% each. Value of receipt of goods and services – Rs 1,000. SGST and CGST rate on receipts is 10% each.
Details SGST CGST
Tax payable on supply of goods and services of Rs 800 80 80
Input tax credit of taxes paid on input goods and services of Rs 1,000 available in Electronic Credit Ledger 100 100
Net tax payable by cash by the dealer in Electronic Cash Ledger Nil Nil
Excess credit 20 20
The excess credit of Rs 20 each of SGST and CGST can be carried forward in Electronic Credit Ledger and utilized in subsequent period. If it is not possible to utilize the excess credit in near future in normal course of business, refund claim can be filed as per provisions of SGST and CGST Act.