The Goods and Services Tax (GST) system has announced an important enhancement related to interest collection and input tax credit (ITC) utilisation in GSTR‑3B. This update follows the earlier advisory issued on January 30, 2026, and aims to provide greater flexibility to taxpayers in managing their tax liabilities.
Key Update: ITC Utilisation Flexibility Introduced
The GST authorities have confirmed that the functionality allowing taxpayers to utilise CGST or SGST ITC for payment of IGST liability will be available starting from the February 2026 tax period, subject to the complete exhaustion of available IGST credit.
This enhancement aligns with point number 3 of the earlier advisory and is expected to streamline the tax payment process while improving cash flow management for businesses.
What This Means for Taxpayers
With this update, taxpayers filing returns in GSTR-3B can now:
- Utilise CGST or SGST input tax credit towards IGST liability
- Choose the order of utilisation after fully exhausting the IGST credit
- Experience improved flexibility in tax set-off mechanisms
- Reduce cash outflow where sufficient ITC balances are available
Objective of the Enhancement
The move is part of ongoing efforts to enhance transparency and simplify compliance within the GST ecosystem. By allowing greater flexibility in ITC utilisation, the update aims to reduce procedural bottlenecks and support smoother return filing for taxpayers.
Advisory Continuation
This update is issued in continuation of the advisory dated January 30, 2026, which outlined changes related to interest computation and ITC utilisation rules. Taxpayers are advised to review their ITC balances carefully while filing returns for the February 2026 period to ensure accurate reporting and compliance.
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