Divisha
This article is about how GST rules allow taxpayers greater flexibility in using CGST and SGST Input Tax Credit against any remaining IGST liability after fully exhausting IGST ITC first.
Earlier Rule
For IGST liability, IGST ITC had to be used first. If still IGST liability remained then,
- CGST ITC had to be used next.
- Only after CGST ITC was fully exhausted, SGST ITC could be used.
New Rule
From January 2026 onwards, once the available IGST ITC has been fully exhausted, the remaining IGST liability can be paid using CGST ITC and SGST ITC in any order:
- Any proportion
- Any sequence
For Example
IGST liability: Rs 5 lakh
ITC Available
- IGST: Rs 2 lakh
- CGST: Rs 3 lakh
- SGST: Rs 3 lakh
Solution
Used Rs 2 lakh IGST ITC
Remaining IGST liability = Rs 3 lakh
Flexible Utilisation of CGST & SGST ITC
Now taxpayers can pay the remaining Rs 3 lakh IGST liability in any order and any proportion —no forced sequence, no cash pressure such as:
| Entirely from CGST ITC | Entirely from SGST ITC | 50:50 Ratio | Any sequence |
| CGST ITC used Rs 3 lakh | SGST ITC used Rs 3 lakh | CGST ITC Rs 1.5 lakh | CGST ITC Rs 2 lakh |
| SGST ITC remains untouched | CGST ITC remains untouched | SGST ITC Rs 1.5 lakh | SGST ITC Rs 1 lakh |
Conclusion
January 2026 amendment gives taxpayers long-awaited freedom to use CGST and SGST ITC smartly after exhausting IGST ITC. By removing the rigid order of utilisation, this change ensures optimal use of available credits and reduces unnecessary cash outflows.
CAclubindia
