ABC Industries has unutilized balance of Service tax as per Service tax last return for the month of June is Rs. 4,58,750. Firm filled all their last six months service tax return from January to June, 2017 and carry forward   Service tax credit in GST as Central Tax on filling TRAN -1 on 25th August.  Service tax dues for Rs 2,45,200 arise subsequently. Clarify whether ITC carried forward under GST as on 01.07.2017 can be used for making payment of Service tax dues arising subsequently.


According to section 140(1) of CGST Act, a registered person in GST entitled to take Cenvat carry forward in last excise and service tax returns for the month preceding 1st July (i.e June) as Central tax and according to 140(1) of SGST Act, ITC in June month return as State tax by filling declaration in FORM TRAN -1 within due date according to Rule 117 of CGST rules. The same will be credited in Electronic credit ledger Account.

CGST Section 49 with relevant CGST rules 85 to 88, provides provisions relating to payment of tax and also for manner of utilization of ITC in electronic credit ledger. Amount in Electronic credit ledger is utilized only for payment of GST. According to section 49(5), Central tax shall first be utilized towards payment of central tax and the amount remaining, if any, may be utilised towards the payment of integrated tax.

According to above Provisions Service tax carry forward in GST as central tax cannot be used for making payment of Service tax dues arising subsequently.