From Feb 2026, GST Portal has introduced an important change in ITC set-off rules in GSTR-3B

From February 2026 (applicable from the January 2026 tax period filings onward), the GST Portal introduced an important change in the Input Tax Credit (ITC) set-off/utilisation rules in GSTR-3B. This update helps taxpayers use their available ITC more flexibly and reduces unnecessary cash outflows.

🔴 What was the issue earlier?

Earlier, ITC utilisation followed a strict order, which caused:

• Blocked ITC balances (especially CGST & SGST)

• Unnecessary cash payment of tax

• Less flexibility for taxpayers

🟢 What has changed now?

✅ 1. IGST ITC still mandatory first

• You must fully utilise IGST ITC first (no change here)

✅ 2. Major Change – Flexibility after IGST

Once IGST ITC is exhausted:

👉 Now you can:

• Use CGST ITC or SGST ITC in any order

• Use CGST/SGST ITC towards IGST liability freely

• Decide your own set-off strategy

🔁 New Set-off Logic (Simple Flow)

1. Use IGST ITC → IGST → CGST → SGST

2. After IGST ITC = NIL:

   • Use CGST ITC / SGST ITC in any order

   • Adjust against:

     • IGST

     • CGST / SGST respectively

📊 Why this is important?

💰 Benefits:

• ✔️ Reduces cash payment

• ✔️ Improves working capital

• ✔️ Better utilisation of ITC

• ✔️ Removes unnecessary restrictions

⚠️ Still Not Allowed

• ❌ CGST ITC cannot be used for SGST liability directly

• ❌ SGST ITC cannot be used for CGST liability directly

👉 That rule remains unchanged.

📍 Where you’ll see this?

• In GSTR-3B → Table 6.1 (Payment of Tax)

• System now allows more flexible adjustment automatically