How to Utilise IGST, CGST and SGST Credit (ITC Set-Off Order)

How to utilise IGST, CGST and SGST credit is set by the Act and the rules. When you file GSTR-3B, the input tax credit (ITC) in your electronic credit ledger can be used to pay output tax. It cannot be used in any mix you like. The order is set out in sections 49, 49A and 49B of the CGST Act, and in Rule 88A.

Two points sit at the centre:

1. Use your IGST credit fully first. You may use CGST, SGST or UTGST credit to pay tax only after the IGST credit has been used up.
2. CGST credit cannot pay SGST or UTGST, and SGST or UTGST credit cannot pay CGST.

The remaining IGST credit, after you have paid your IGST liability, is flexible. You may apply it to CGST and SGST (or UTGST) in any order and in any proportion. That flexibility matters. A poor split can leave credit unused in one head while you pay cash for the other.

The set-off order, in short

Step 1 — IGST credit

• First, use IGST credit to pay IGST liability.
• If any IGST credit is still left, use it to pay CGST and / or SGST (or UTGST) in any order and in any proportion.
• Use up the whole IGST credit before you use CGST, SGST or UTGST credit.

This is Rule 88A, read with section 49A. Section 49(5)(a) had earlier been read as a fixed path of IGST, then CGST, then SGST. Rule 88A, inserted by Notification No. 16/2019–Central Tax dated 29 March 2019, and Circular No. 98/17/2019-GST dated 23 April 2019, make it clear that after the IGST liability is paid, the leftover IGST credit is not locked to “CGST first, then SGST.”

Step 2 — CGST credit (only after IGST credit is fully used)

• Use CGST credit first to pay CGST liability.
• If any CGST credit is still left, you may use it to pay remaining IGST liability.
• You cannot use it to pay SGST or UTGST.

Step 3 — SGST or UTGST credit (only after IGST credit is fully used)

• Use SGST credit first to pay SGST liability. UTGST works the same way for UTGST liability.
• If any SGST or UTGST credit is still left, you may use it to pay remaining IGST liability, but only when CGST credit is not available for that IGST payment.
• You cannot use SGST or UTGST credit to pay CGST.

What is allowed, and what is not

A worked example

These figures are an illustration only, so you can see the order. They are not from a live return.

Credit available: IGST ₹50,000; CGST ₹10,000; SGST ₹10,000
Tax payable: IGST ₹20,000; CGST ₹30,000; SGST ₹30,000

You have ₹70,000 of credit and ₹80,000 of tax. You will have to pay some cash. The question is how much, and under which head.

A good split (use this pattern)

Use the leftover IGST credit on both CGST and SGST, so that each local credit can finish its own head.

1. IGST credit ₹20,000 pays the IGST liability of ₹20,000. IGST is clear. IGST credit left: ₹30,000.
2. Of that leftover IGST credit, use ₹20,000 towards CGST and ₹10,000 towards SGST. IGST credit is now fully used.
3. CGST credit ₹10,000 pays the remaining CGST of ₹10,000. CGST is clear.
4. SGST credit ₹10,000 goes towards the remaining SGST of ₹20,000.

Cash to pay: SGST ₹10,000 only. No credit is left unused.

This follows Rule 88A: the IGST credit is used first against IGST, the remainder is split between CGST and SGST, and only then are the CGST and SGST credits used. Circular 98 uses different official figures, but the same idea — leftover IGST credit may be applied to CGST and SGST in any proportion, so you do not have to pay cash under one head while credit sits unused under the other.

Avoid this split

If you pour the entire leftover IGST credit into CGST, you clear CGST, but you leave SGST short, and the leftover CGST credit cannot be moved across.

1. IGST credit ₹20,000 pays the IGST liability. IGST credit left: ₹30,000.
2. The whole ₹30,000 leftover goes to CGST. CGST is clear. IGST credit is fully used. Nothing is left to apply to SGST.
3. CGST credit of ₹10,000 has no CGST left to pay, and it cannot be used for SGST, so it sits unused.
4. SGST credit ₹10,000 goes towards SGST of ₹30,000.

Cash to pay: SGST ₹20,000, while ₹10,000 of CGST credit remains idle.

You still had ₹70,000 of credit in total. You needed only ₹10,000 in cash. This split makes you pay ₹20,000 in cash.

How the GST portal applies this

On the GST portal, in GSTR-3B, the system auto-fills “Tax to be paid through ITC” using the credit-utilisation rules, with an optimum set-off. You may edit those figures. If you change the ITC used, the cash to be paid changes with it.

The official GST portal user guide states the same order as Rule 88A: remaining IGST credit may be used against CGST or SGST / UTGST in any order, before you use CGST or SGST / UTGST credit. It also states that leftover SGST or UTGST credit may be used for remaining IGST only if no CGST credit is available, which matches the proviso in section 49(5).

Always check the payment table on the portal before you offset the liability. The offset in a tax period can be used only once.

Points that often get missed

• UTGST is treated like SGST. In a Union territory without a legislature, read UTGST wherever this guide says SGST. UTGST credit cannot pay CGST, and CGST credit cannot pay UTGST. IGST Act section 18 and UTGST Act section 9 move and use that credit on the same pattern.
• ITC pays output tax only. It cannot be used to pay reverse-charge tax, interest, penalty, late fee, TDS or TCS. Those are paid in cash (or, where the portal allows it, from a negative liability balance).
• Last checked on 10 November 2026 (Asia/Calcutta): no later change was found to the set-off order in section 49(5), section 49A, section 49B or Rule 88A. The Finance (No. 2) Act, 2024 did amend section 49, but only in sub-section (8)(c), to add a reference to section 74A. That does not change this order.

The GST calculator and the GST invoice generator help you work out the tax on a supply and raise the invoice. They do not work out ITC set-off for GSTR-3B. For the difference between CGST, SGST and IGST on an invoice, see How to calculate CGST, SGST and IGST. For what must be on the invoice, see How to create a GST invoice and a salary slip online. For reverse-charge tax, which this credit cannot pay, see How to report RCM in GSTR-3B.