Question

What is the purpose of cross-utilization of goods and services under the GST regime?

• A. To prevent the offsetting of tax liabilities
• B. To encourage the cascading effect of taxes
• C. To reduce the overall tax burden and prevent tax cascading
• D. To hinder the efficiency of tax credits for businesses

Answer 1

Answer:

C. To reduce the overall tax burden and prevent tax cascading

Cross-utilization of credits under the Goods and Services Tax (GST) system

• It refers to the ability to use input tax credits from one component of GST for another.
• In the context of GST, businesses can utilize the credit component of Central GST (CGST) or State GST (SGST) for Integrated GST (IGST) and vice versa.
• However, it's important to note that credits of CGST and SGST cannot be used interchangeably.
• This cross-utilization is implemented to ensure that the overall tax burden is reduced and that the cascading effect of taxes is prevented.
• It allows businesses to offset their tax liabilities efficiently, ensuring a smoother flow of credits within the GST framework.