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Section 9 of UTGST Act, 2017 - Payment of Tax

Section 9 of the Union Territory Goods and Services Tax Act, 2017 (UTGST Act) governs how a registered person may use input tax credit (ITC) in the electronic credit ledger to discharge GST liabilities. The provision must be read with the subsequently inserted Sections 9A and 9B, Section 49 and related provisions of the Central Goods and Services Tax Act, 2017, and applicable rules.

Text of Section 9 - Payment of tax (as amended)

The amount of input tax credit available in the electronic credit ledger of the registered person on account of,-

(a) integrated tax shall first be utilised towards payment of integrated tax and the amount remaining, if any, may be utilised towards the payment of central tax and State tax, or as the case may be, Union territory tax, in that order;

(b) the Union territory tax shall first be utilised towards payment of Union territory tax and the amount remaining, if any, may be utilised towards payment of integrated tax:

Provided that the input tax credit on account of Union territory tax shall be utilised towards payment of integrated tax only where the balance of the input tax credit on account of central tax is not available for payment of integrated tax;

(c) the Union territory tax shall not be utilised towards payment of central tax.

The proviso to clause (b) was inserted by the Union Territory Goods and Services Tax (Amendment) Act, 2018 (Act 33 of 2018), with effect from 1 February 2019. The original webpage did not include this proviso. See the official consolidated UTGST Act on India Code.

Meaning of Section 9: ITC utilisation rules

Clause (a): Integrated tax credit

Credit of integrated GST (IGST) must first be used to pay IGST. Any balance may be applied towards central GST (CGST) and Union territory GST (UTGST), subject to the overriding priority and prescribed order under Sections 9A and 9B and the corresponding CGST provisions. Therefore, the sequence in clause (a) should not be applied in isolation.

Clause (b): Union territory tax credit

UTGST credit is ordinarily used first against UTGST liability. Any remaining eligible UTGST credit may be used against IGST liability, but only after the relevant statutory conditions are satisfied. In particular, the proviso requires that the balance of central tax credit is not available for paying IGST.

Clause (c): Prohibition on paying CGST with UTGST credit

UTGST input tax credit cannot be used to pay CGST liability. Corresponding restrictions also apply to the use of CGST credit against UTGST liabilities.

Sections 9A and 9B: Overriding utilisation requirements

Section 9A - Utilisation of input tax credit

Notwithstanding Section 9, UTGST credit may be utilised towards payment of IGST or UTGST only after available IGST credit has first been utilised towards such payment. This establishes priority for available IGST credit.

Section 9B - Order of utilisation of input tax credit

Section 9B empowers the Government, on the recommendations of the GST Council, to prescribe the order and manner of using IGST, CGST, SGST or UTGST credits to pay tax, while preserving the prohibition in Section 9(c). Read this alongside Section 49 of the CGST Act, Sections 49A and 49B of that Act and Rule 88A of the CGST Rules, as applicable.

Practical sequence when paying GST

  1. Check the available and eligible IGST, CGST and UTGST credits in the electronic credit ledger.
  2. Apply available IGST credit first, following the prescribed order and any permitted choice for the balance under the rules.
  3. Apply UTGST credit against UTGST liability, subject to the priority for IGST credit.
  4. Use any eligible remaining UTGST credit against IGST only where the conditions in Section 9(b) and its proviso are met.
  5. Never apply UTGST credit to CGST liability; pay any balance using other eligible credits or the electronic cash ledger, as the law permits.
Important distinction: The electronic credit ledger records eligible input tax credit used for output tax, whereas the electronic cash ledger records deposits usable for tax and other dues. ITC is not a general substitute for cash payment of interest, penalty or fees.

Related UTGST provisions and official sources

For a particular tax period, verify the applicable statutory amendments, notifications, rules and electronic ledger balances before setting off credit.