GST has three credit pools — IGST, CGST, SGST/UTGST. Their cross-utilisation is governed by strict ordering rules.
## Master Utilisation Matrix
Credit of ↓
CGST Liability
SGST/UTGST Liability
IGST Liability
IGST
✓ (any order/proportion)
✓ (any order/proportion)
✓ (1st priority)
CGST
✓
✗ (NOT allowed)
✓
SGST / UTGST
✗ (NOT allowed)
✓
✓ (only if CGST credit fully exhausted)
## The Ordering Rules (Memorise!)
1. IGST credit MUST be used FIRST — Pay IGST liability fully → then any leftover IGST credit can settle CGST/SGST/UTGST in any order/proportion (subject to cash-minimisation if mandated).
2. CGST/SGST/UTGST credits can be used only AFTER IGST credit is fully exhausted.
3. SGST/UTGST credit → IGST liability: allowed only after CGST credit is fully utilised.
ITC can pay only output tax (on sale). Compulsorily payable in CASH:
Fees, penalties, interest, late fees
Tax under Reverse Charge Mechanism (RCM) on inputs
## Other Key Points
Tax paid under RCM can be taken as ITC in the same period.
If purchases are from unregistered persons, no tax is collected → no ITC question arises.
IGST after settling IGST liability can be deployed flexibly provided total cash payment is minimum (unless specific instructions override).
Worked example
### Example 1
Example 1 — Standard Utilisation
Type
Opening ITC
Credit Availed
Total ITC
Output Liability
IGST
11,00,000
7,00,000
18,00,000
22,00,000
CGST
10,00,000
6,00,000
16,00,000
14,00,000
SGST
8,00,000
5,00,000
13,00,000
9,00,000
Solution:
Step
IGST
CGST
SGST
Gross Liability
22,00,000
14,00,000
9,00,000
(−) IGST Credit
(18,00,000)
—
—
(−) CGST Credit
(2,00,000)
(14,00,000)
—
(−) SGST Credit
(2,00,000)
—
(9,00,000)
Cash payable
0
0
0
SGST credit of ₹2,00,000 carries forward.
### Example 2
Example 2 — Insufficient SGST + Lower IGST Liability
Same facts as Example 1 but SGST credit = ₹5,00,000 and IGST liability = ₹15,00,000.
Step
IGST
CGST
SGST
Gross Liability
15,00,000
14,00,000
9,00,000
(−) IGST Credit (18L available)
(15,00,000)
—
(3,00,000)
(−) CGST Credit (16L available)
—
(14,00,000)
—
(−) SGST Credit (5L available)
—
—
(5,00,000)
Cash payable
0
0
1,00,000
CGST credit of ₹2,00,000 carries forward.
⚠️ Common exam mistakes
Using CGST credit to pay SGST liability or vice versa — strictly prohibited, no exceptions.
Trying to pay RCM liability with ITC — RCM must always be discharged in CASH.
Using CGST/SGST credits before exhausting IGST credit — Section 49 mandates IGST first.
Using SGST credit against IGST liability without first exhausting CGST credit.
Paying interest, late fees, or penalties through ITC — only output tax can be paid via credit ledger.
Ignoring the cash-minimisation rule when deploying surplus IGST credit across CGST and SGST.
Bare-Act text Section 49(5) · CGST Act, 2017 · click to expand
Section 49(5): The amount of input tax credit available in the electronic credit ledger of the registered person on account of —
(a) integrated tax shall first be utilised towards payment of integrated tax and the amount remaining, if any, may be utilised towards the payment of central tax and State tax, or as the case may be, Union territory tax, in that order;
(b) the central tax shall first be utilised towards payment of central tax and the amount remaining, if any, may be utilised towards the payment of integrated tax;
(c) the State tax shall first be utilised towards payment of State tax and the amount remaining, if any, may be utilised towards payment of integrated tax... Provided that the input tax credit on account of State tax shall be utilised towards payment of integrated tax only where the balance of the input tax credit on account of central tax is not available for payment of integrated tax;
(e) the central tax shall not be utilised towards payment of State tax or Union territory tax; and
(f) the State tax or Union territory tax shall not be utilised towards payment of central tax.