Excess Credit Carry Forward

Excess Credit Carry Forward – Excess credit carry forward refers to the process of carrying forward unutilized tax credits—such as Input Tax Credit (ITC) under GST or Tax Deducted at Source (TDS) under the Income Tax Act—to subsequent tax periods when they cannot be fully set off in the current period. Under GST, if the input tax credit (on purchases) exceeds the output tax liability (on sales) in a given month, the remaining credit is carried forward to the next tax period and can be used to offset future GST dues. Similarly, under the Income Tax Act, if the TDS or advance tax paid is more than the tax payable for the year, the excess amount can either be adjusted against future tax liabilities or claimed as a refund in the next assessment year.

Example: A business has IGST input credit of ₹50,000 and output tax liability of ₹30,000 for November. The remaining ₹20,000 ITC is carried forward to December to offset future GST liability.