Offset IGST Liability with CGST credit before utilizing sgst/utgst credit

[Gourav Ravi Garg]

Dear experts, i am facing a problem in cross utilisation of ITC. The scenario is that tax payable under IGST, CGST & SGST is 5,15,361, 2,19,180 & 2,19,180 respectively. Now while adjusting IGST, the portal allows adjustments first through IGST, then CGST, and in the last from the SGST after exhausting CGST. This issue leads to the accumulation of ITC in SGST.

As far as I remember, there was a notification in the January 2026. I waws able to adjust it according to my favour in the month of Feb, but after that, it is back to the old scenario.

Please advise.

[Ryan Vaz]

Yes, your understanding is correct.

For a brief period around Jan-Feb 2026, GSTN allowed taxpayers to utilise CGST and SGST ITC against IGST liability in any order/proportion after exhausting IGST ITC. However, the portal now appears to have reverted to the earlier validation logic where:

1. IGST ITC must be exhausted first;
2. Then CGST ITC is compulsorily utilised against IGST liability;
3. Only after CGST ITC is exhausted does the portal permit SGST ITC utilisation.

This causes practical accumulation of SGST credit, especially in businesses having high interstate outward supplies. The issue presently appears to be a GSTN system behaviour issue, not a legal prohibition under Rule 88A.

[KASTURI SETHI]

Common Portal System must synchronize with the GST Acts and Rules. If such synchronization is missing, GST Acts and Rules will prevail over Common Portal System. Therefore, in this scenario, Sections 49, 49A, 49B read with Rule 88A are to be followed.

[Raam Srinivasan Swaminathan Kalpathi]

GST advisory 647 Point no.3 states thus

"From January-2026 period onwards, once the available IGST ITC has been fully exhausted, the GST Portal will allow to pay IGST liability in Table 6.1 of GSTR-3B using available CGST and SGST ITC in any sequence".

That this is being discontinued in subsequent months is news. Another client of mine just called to inform that they are able to cross utilise CGST and SGST. Kindly double check for any technical lapses on your part.

[Sadanand Bulbule]

Common Portal System (CPS) is digital subordinate to the statute. So taxpayers and authorities are bound by the statute and CPS needs to structered accrodingly.

[YAGAY and SUN]

The legal position remains governed by Sections 49, 49A and 49B of the CGST Act read with Rule 88A of the CGST Rules. Rule 88A specifically permits utilisation of IGST credit first towards IGST liability and thereafter towards CGST and SGST/UTGST "in any order and in any proportion", subject only to prior exhaustion of IGST credit. GST Advisory No. 647, Point No. 3, further clarified that from the January 2026 tax period onwards, once IGST ITC is fully exhausted, the GST Portal would permit payment of IGST liability through available CGST and SGST credit in any sequence. Therefore, compulsory exhaustion of CGST credit before permitting utilisation of SGST credit against IGST liability is not supported by the statutory framework.

Accordingly, if the Common Portal System presently restricts such cross-utilisation, the issue appears to be a system-validation inconsistency and not a substantive legal embargo. The portal is only a procedural mechanism and cannot override the Act and Rules. In case of conflict, statutory provisions prevail over portal architecture. Since other taxpayers are reportedly able to utilise CGST and SGST credit in flexible sequence, the issue may also be account-specific or technical in nature. The taxpayer may revalidate ledger balances, clear browser/cache issues, and if the anomaly persists, raise a grievance with GSTN citing Rule 88A, while maintaining documentary evidence of the attempted utilisation pattern.

[KASTURI SETHI]

Advisories/circulars have no statutory force.

[YAGAY and SUN]

In addition to above:-

Nature and Classification of Departmental Circulars

Departmental instruments may broadly be classified into the following categories:

1. Clarificatory Circulars;
2. Procedural Instructions;
3. Trade Facilitation Advisories;
4. Beneficial Circulars;
5. Oppressive or Burdensome Circulars;
6. Interpretational Circulars;
7. Internal Administrative Guidelines.

The legal effect varies depending upon the nature and content of the circular.

A beneficial circular granting administrative relief is generally construed liberally and applied retrospectively, whereas a burdensome circular creating additional liabilities beyond the statute is liable to be struck down.

[YAGAY and SUN]

Binding Nature of Circulars upon Departmental Officers

One of the most settled propositions in tax jurisprudence is that circulars issued by the Board are binding upon departmental authorities.

This principle was authoritatively laid down by the Supreme Court in several landmark decisions including:

• Ranadey Micronutrients v. CCE - 1996 (9) TMI 124 - Supreme Court;
• Paper Products Ltd. v. CCE - 1999 (8) TMI 70 - Supreme Court;
• Dhiren Chemical Industries - 2001 (12) TMI 3 - Supreme Court;
• Kalyani Packaging Industry - 2004 (5) TMI 78 - Supreme Court;
• Ratan Melting & Wire Industries - 2005 (2) TMI 138 - Supreme Court.

The rationale is administrative discipline and certainty in tax administration. Officers functioning under the CBIC cannot argue contrary to Board circulars so long as such circulars remain in operation.

The Supreme Court has repeatedly observed that consistency and uniformity in tax administration are indispensable and departmental officers cannot take contradictory stands contrary to binding circulars.

Even where the circular's interpretation differs from the department's litigation position, field formations remain bound until the circular is withdrawn or declared invalid.

Recently, the Supreme Court reiterated that departmental circulars are binding on authorities while considering GST detention proceedings and procedural compliance requirements. Likewise, the Allahabad High Court quashed GST demand orders where adjudicating authorities ignored binding CBIC clarifications

Therefore, as on date, there remains no ambiguity that departmental officers are strictly bound by CBIC circulars and instructions.

[YAGAY and SUN]

Binding Nature of Advisories and FAQs

Apart from formal circulars, GST administration frequently issues advisories, portal notices, FAQs and press releases. These instruments stand on a weaker legal footing than statutory circulars.

Unless issued under statutory authority such as Section 168, advisories and FAQs generally possess persuasive value only and do not create enforceable legal obligations. Courts have repeatedly held that technical portal advisories cannot override substantive statutory rights. Similarly, Frequently Asked Questions published on GST portals merely reflect administrative understanding and lack statutory force.

Thus, taxpayers cannot ordinarily be penalized solely for breach of portal advisories unless supported by statutory provisions.

[Shilpi Jain]

This is a genuine problem that arises. you need to see how you can plan your purchases in a manner that this accumulation can be done away with.

[Shilpi Jain]

The GSTN advisory that was given was not in line with the existing provisions in the law which was why it was withdrawn.

AI Summary

Input tax credit utilisation under GST follows Rule 88A, and portal validation cannot override statutory credit ordering.
Cross-utilisation of input tax credit for IGST liability is governed by Sections 49, 49A and 49B of the CGST Act read with Rule 88A of the CGST Rules, which permits utilisation of IGST credit first and thereafter CGST and SGST/UTGST credit in any order and in any proportion after exhaustion of IGST credit. A portal validation sequence that requires CGST credit to be exhausted before SGST credit is used is treated as a system issue and not as a substantive legal restriction. Statutory provisions prevail over portal architecture, and advisories or FAQs cannot override the law.