Section 18 of IGST Act 2017: Transfer of Input Tax Credit (ITC)

Provisions under Section 18 of the Integrated Goods and Services Tax (IGST) Act, 2017 relating to “Transfer of Input Tax Credit (ITC)”, are as under:

Section 18 of IGST Act 2017: Transfer of Input Tax Credit (CHAPTER VIII – APPORTIONMENT OF TAX AND SETTLEMENT OF FUNDS)

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.

Amendments History:

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Commentary on Section 18 of the IGST Act

Section 18 of the Integrated Goods and Services Tax (IGST) Act, 2017, deals with the transfer of Input Tax Credit (ITC) in various scenarios. The section outlines the procedures for utilizing the credit of integrated tax for the payment of central tax, Union territory tax and State tax. Here is a commentary on the provisions of Section 18:

Utilization of integrated tax credit for payment of central tax: Section 18(a) of the IGST Act

When a taxpayer utilizes the credit of integrated tax for payment of central tax as per sub-section (5) of section 49 of the Central Goods and Services Tax Act, the amount collected as integrated tax is reduced by the amount equal to the credit utilized. The Central Government is then required to transfer an equal amount from the integrated tax account to the central tax account within the prescribed time and manner.

Utilization of integrated tax credit for payment of Union territory tax: Section 18(b) of the IGST Act

Similarly, when a taxpayer utilizes the credit of integrated tax for payment of Union territory tax as per section 9 of the Union Territory Goods and Services Tax Act, the amount collected as integrated tax is reduced by the amount equal to the credit utilized. The Central Government must then transfer an equal amount from the integrated tax account to the Union territory tax account within the prescribed time and manner.

Utilization of integrated tax credit for payment of State tax: Section 18(c) of the IGST Act

When a taxpayer utilizes the credit of integrated tax for payment of State tax as per the provisions of the respective State Goods and Services Tax Act, the amount collected as integrated tax is reduced by the amount equal to the credit utilized. The reduced amount is then apportioned to the appropriate State Government, and the Central Government is responsible for transferring the apportioned amount to the account of the appropriate State Government within the prescribed time and manner.

Explanation to Section 18 of the IGST Act

The explanation provided in Section 18 clarifies that the term “appropriate State” refers to the State or Union territory where the taxable person is registered or is liable to be registered under the provisions of the Central Goods and Services Tax Act. This helps in determining the proper jurisdiction for the transfer of the input tax credit.

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Note: The IGST Act 2017 has been notified vide GOI Notification dated 12/04/2017, which has subsequently been amended through IGST Extension to J&K Act 2017, IGST (Amendment) Act 2018. Finance Act 2019, Finance Act 2020, Finance Act 2021, Finance Act, 2022 and Finance Act, 2023, including various Notifications issued by the Govt./ CBIC from time to time, relating to the commencement dates of various Sections/ Provisions in the respective IGST/ Amendment Acts, wherever required. Information on this page is a Section-wise compilation of the Amendments made by various Notifications issued by CBIC from time to time, with best possible efforts for accuracy. In any case, E&OE. For official/ updated information, please visit CBIC website.