Set off in GST
Set off in GST refers to the process of adjusting the tax liability of a registered person by utilizing the input tax credit (ITC) available to them.
Input tax credit is the credit that a registered person can claim for the GST paid on their purchases, which can set off against their output tax liability.
For example, if a business has purchase goods worth INR 10,000 and paid GST of INR 1,800 on the purchase, they can claim ITC of INR 1,800, which can set off against their output tax liability.
Set off can be done in two ways:
1. Intra-head set off:
Intra-head set off refers to the utilization of ITC for the same type of tax liability. For example, ITC of IGST (Integrated GST) can set off against the output liability of IGST.
ITC of CGST (CentralGST) can set off against the output liability of CGST.
2. Inter-head set off:
Inter-head set off refers to the utilization of ITC for a different type of tax liability. For example, ITC of IGST can set off against the output liability of CGST and SGST (StateGST).
To visit https://www.gst.gov.in/
It is important to note that set off can only be done if the registered person has valid tax invoices or debit notes, and if the tax liability is for the same tax period as the ITC.
Any excess ITC that remains unutilized can carried forward to the subsequent tax periods, and can set off against the output liability in those periods.
Set off is an important mechanism in GST, as it helps in reducing the overall tax liability of a registered person and promotes compliance.
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