GST Input Tax Credit Setting off Rules changed from 1st February 2019

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GST Input Tax Credit Setting off Rules changed from 1st February 2019

The government has amended CGST Act 2017 vide CGST Amendment Act 2018 with various changes w.e.f and one of the important amendment was made in Section 49 of CGST Act by introducing new section 49A after the section 49, which is as under:

GST Input Tax Credit Setting off Rules changed from 1st February 2019

Government has eased cash flow concerns of trade industry with relaxations in ITC setoff mechanism vide Notification number 16/2019 – Central Tax dated 29th March 2019 by inserting Rule 88A.

Kindly read our next Article on Rule 88A Input Tax Credit Set off Explained with Examples after reading this article to have complete understanding of new ITC rules

Legal Text

Section 49A has been inserted by Section 21 of CGST Amendment Act 2018

Notwithstanding anything contained in section 49, the input tax credit on account of central tax, State tax or Union territory tax shall be utilized towards payment of integrated tax, central tax, State tax or Union territory tax, as the case may be, only after the input tax credit available on account of integrated tax has first been utilized fully towards such payment

Section 21 of CGST Amendment Act 2018 has been presented below for reference

Subsection 5 of Section 49 of CGST Act 2017 speaks about manner of utilising Input Tax Credit (ITC) for payment of GST output Tax liability, e.g IGST can be Set off against IGST and then CGST and SGST, CGST can be set off against CGST and then against IGST, and SGST can be set off against SGST and then against IGST.

Section 49A Over Rules complete Section 49

Section 49(5) of CGST Amendment Act 2017 has been presented below for reference

Impact of amendment

Government has changed the order of setoff by introducing section 49A w.e.f 1st February 2019 and now IGST Credit should be set off fully before taking setting of CGST or SGST Credit.

This has been Explained with a small Example

GST Input Tax Credit Setting off Rules changed from 1st February 2019

GST Input Tax Credit Setting off Rules changed from 1st February 2019


As per the Existing set of Provisions following Set-off Rules were applicable.

Payment ForSet-Off-1Set-Off-2

As per New Set of Provisions applicable with effect from 1st February 2019 below mentioned set-off rules are applicable.

Payment ForSet-Off-1Set-Off-2

Disclaimer: The entire contents of this document have been prepared on the basis of relevant provisions and as per the information existing at the time of the preparation. Although care has been taken to ensure the accuracy, completeness and reliability of the information provided, I assume no responsibility therefore. Users of this information are expected to refer to the relevant existing provisions of applicable Laws. The user of the information agrees that the information is not a professional advice and is subject to change without notice. I assume no responsibility for the consequences of use of such information. In no event shall I shall be liable for any direct, indirect, special or incidental damage resulting from, arising out of or in connection with the use of the information.

Author Bio
Name : Pratibha Goyal
Qualification : Chartered Accountant
Company Name :
Designation : Chartered Accountant
State: Delhi
City : Delhi
Bio : The Author is a qualified Chartered Accountant. For any queries comment below. All your Queries will be addressed.You can also ask your queries on

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  1. 1

    This is bizarre.
    It will paper the trade and industry badly and ultimately will derail the GST.
    Who will make interstate purchases now until and unless he has interstate sales.
    This is simply ridiculous

  2. 2

    Dear Pratibha Goyal

    IGST can set off with SGST Also.

    As per Previous Rule
    IGST – IGST (1st set off ) – CGST & SGST (2nd Set off)
    As per New Provision
    IGST – IGST (1st Set off) – CGST & SGST (2nd Set off)
    Pls. correct your summery

  3. 4

    Is this new rule applicable for GST Liability for the month of January 2019 which is actually payable in February 2019.

  4. 11
  5. 12
  6. 13

    Kindly advise under what situation can the ITC available be different under CGST and SGST. I think the sample data in your example is incorrect as both CGST and SGST ITC have to be equal amounts and then the working will change.

    • 14

      Sir as per my understanding the Example is correct.

      CGST and SGST Credit may be of different amount. I have seen that practically as well. Indeed the situation will change with Different figures of ITC

      • 15

        Yes because of carried forward of amount, the CGST as well as SGST credit could be different. Like Suppose we adjusted CGST output with IGST Credit as well as CGST credit but we couldnt set off the SGST credit with IGST because IGST credit already exhausted with CGST output so accordingly now its possible that we have the carried forward CGST credit in our hand but no SGST credit or lessor SGST credit compare to CGST credit. In such a situation there is a possibility of unequal credit of CGST and SGST.

      • 17
  7. 18

    So this will badly affect the cash flows and derail the basic idea behind gst
    Hasn’t chambers and industry body have given there reservations against this

  8. 19

    PAY 25000 35000 35000
    REC 50000 25000 25000

    IGST 25000
    CGST 25000 10000 15000 CR
    SGST 0 0 25000 10000 CASH

  9. 20
  10. 21
    • 22

      It will be applicable from Feb month calculation,depends on how portal accepts in th efigure in new concept or the old concept

  11. 23
  12. 24

    This is not the interpretation as per me. New provision, nowhere specify that in order of utilization of credit of IGST, CGST has first preference over SGST.

    I/P 200 100 100
    O/P 50 150 150

    IGST CGST SGST Cash Total O/P
    IGST 50 0 0 0 50
    CGST 100 50 0 0 150
    SGST 50 0 100 0 150
    C/F-I/P 0 50 0 0

    As per my opinion, remaining credit of IGST, after it’s utilization against O/P IGST, can be used in any order and with any portion (whether half/portion). Refer interpretation of Section 49 (5a).

    49A is only saying that before use of credit of CGST or SGST, credit of IGST has to be fully used.

    Nowhere it says that CGST has first preference over SGST for the purpose of using credit of IGST.
    M) 9727706150

  13. 25

    IGST INPUT 100
    CGST INPUT 100
    SGST INPUT 100
    IGST CREDIT AVAILABLE (20-100) -80
    CGST PAYABLE (120-100) 20
    SGST PAYABLE (120-100) 20
    As per new calculation -80 – 20 – 20
    IGST ITC Available -40
    Is it correct or not please confirm

  14. 26
  15. 29

    Nikul Shrimali has correctly pointed out the catch.

    49 (A) has overridden section 49 completely. Only provision 49 (5) (e) and (f) have been retained which simply reiterate that CGST and SGST cannot be adjusted against each other.

    The order of adjustment of Input Tax Credit was specified in section 49 (5) (a) IGST>CGST>SGST but that section has now been overridden.

    Instead a new section 49 (B) has been introduced that says that Government may on recommendation of the GST council prescribe the order and manner of utilisation of Input Tax Credit. (which it hasn’t so far prescribed).

    Thus it would be prudent to adjust leftover of IGST (after adjustment with output liability of IGST) half against CGST liability and half against SGST liability to minimise blockage of credit.

    However one point remains that is if Government frequently keeps changing this law and doesn’t prescribe any order then lawlessness will prevail. Eventually in these cases what happens is that retrospective amendments are brought in when error is discovered and that causes a lot of heart burns later.

  16. 31

    I have liability of IGST-0, CGST-4977,SGST-4977 and ITC of IGST-14400, CGST-34234, SGST-141979 when i am trying to offset my laibility as per new provision shows me this error message – offset the CGST credit against the CGST liability first before cross-utilization.If error persists quote error number LG9069 when you contact customer care for quick resolution.

    • 32

      Sir as per best of my knowledge, the set-off should be as follows :

      CGST-4977 (IGST ITC)
      SGST-4977 (IGST ITC)

      Carry Forward
      IGST ITC 4446

      This is as per my understanding of new provisions.

  17. 33

    468237 90000 90000

    21002 4804 4804


  18. 34

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