Section 53 of CGST Act, 2017 : Section 53: Transfer Of Input Tax Credit

Explanation using Example

Imagine a business in Mumbai, which is registered under the Goods and Services Tax (GST) system, has made interstate sales and is liable to pay Integrated Goods and Services Tax (IGST). The business has also accumulated a certain amount of Central Goods and Services Tax (CGST) as input tax credit (ITC) from its purchases. When it comes time to file their monthly GST returns, the business decides to use the CGST credit to offset part of its IGST liability, as allowed by the GST laws.

According to Section 53 of the Central Goods and Services Tax Act, 2017, when the business utilises its CGST credit to pay for the IGST dues, the amount of CGST collected by the government will be reduced by the amount of credit used for such payment. Consequently, the Central Government will then transfer the equivalent amount from the central tax account to the integrated tax account to adjust the ledgers accordingly. This ensures that the tax revenue is allocated correctly between the central and state governments.