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.

AI Summary

Input tax credit cross-utilisation under GST raises a dispute over IGST set-off order and SGST credit accumulation. Cross utilisation of input tax credit under GST is raised in relation to the sequence for discharging IGST liability through available credits of IGST, CGST and SGST/UTGST. The issue described is that the portal permits adjustment first from IGST credit, then CGST credit, and only thereafter from SGST credit after CGST is exhausted, which is stated to result in accumulation of SGST input tax credit. The matter concerns the practical operation of cross-utilisation rules for input tax credit and the order in which credits may be applied against IGST payable.