GST Set-off Order under Section 49 and Rule 88A: A Worked Worksheet

Each month you set off your input tax credit against your output tax and pay the rest in cash. The order in which credit is used is fixed by law, and getting it wrong does not just look untidy — it can leave you paying cash under one head while credit sits unused under another.

The rules in one place

• IGST credit must first be used against IGST liability (Section 49(5)(a)).
• Any IGST credit left may then be used against CGST and SGST/UTGST liability, in any order and in any proportion (Rule 88A, inserted in 2019).
• CGST and SGST credit can be used only after IGST credit has been fully used (Section 49A).
• CGST credit is used against CGST, then against IGST.
• SGST/UTGST credit is used against SGST/UTGST, then against IGST.
• CGST credit can never be used against SGST, or the other way round.
• Interest, late fees and penalties cannot be paid from the credit ledger — only from cash.

Why the proportion matters

Rule 88A lets you split leftover IGST credit between CGST and SGST as you choose. Suppose you have a CGST liability that your CGST credit cannot cover, but enough SGST credit for your SGST liability. Putting the leftover IGST credit against CGST saves cash; putting it against SGST wastes it, because SGST credit was already enough. The worksheet allocates IGST credit to the gap on each side first, so cash is minimised, and then uses any remaining IGST credit (it must be used before CGST or SGST credit).

A worked example (illustrative)

Output tax: IGST ₹1,20,000, CGST ₹80,000, SGST ₹80,000. Credit: IGST ₹1,50,000, CGST ₹30,000, SGST ₹45,000.

1. IGST credit against IGST: ₹1,20,000. IGST credit left: ₹30,000.
2. CGST gap after its own credit: ₹80,000 − ₹30,000 = ₹50,000. SGST gap: ₹80,000 − ₹45,000 = ₹35,000. The ₹30,000 IGST credit goes to the CGST gap first (the worksheet fills the CGST gap, then the SGST gap).
3. CGST credit ₹30,000 against the remaining CGST of ₹50,000 → cash CGST ₹20,000.
4. SGST credit ₹45,000 against SGST ₹80,000 → cash SGST ₹35,000.
5. Total cash: ₹55,000. No credit is carried forward.

Any split of the ₹30,000 IGST credit between the two sides gives the same total here because both sides have a gap larger than the credit; the allocation starts to matter when one side's own credit already covers its liability.

Using the worksheet

1. Enter output tax by head from your sales register or GSTR-1.
2. Enter eligible credit by head after your GSTR-2B check and any reversals.
3. Read each step, the cash payable by head and the credit carried forward.
4. If you will pay late, enter days late to estimate interest on the cash portion. Interest under Section 50 applies to the tax paid in cash after the due date — verify the rate and computation for your case.

The GST portal applies its own set-off when you file GSTR-3B, offering a suggested utilisation you can edit; the worksheet lets you check it and plan cash before the due date.

Per GSTIN

Set-off happens separately for each GSTIN. If you have registrations in several states, prepare one worksheet per GSTIN — credit cannot be moved between them except through the mechanisms the law provides (such as the input service distributor route or a tax invoice on a supply between them; see our note on branch transfers).

Bebaak's monthly set-off screen works out the same order per GSTIN, prepares the set-off journal and challan and locks the month — see GST set-off and closing.

Common mistakes

• Using CGST credit before IGST credit is exhausted.
• Leaving IGST credit unused while paying CGST or SGST in cash.
• Trying to pay interest from the credit ledger.
• Setting off across GSTINs.
• Accepting the portal's suggested utilisation without checking it against your own working.

Before you file

1. Confirm the output tax matches GSTR-1 and your sales register.
2. Confirm eligible credit matches GSTR-2B after reversals.
3. Run the worksheet and compare it with the portal's suggestion.
4. Pay the cash portion before the due date and keep the challan with the month's file.