Can CGST be adjusted against SGST?

“Can CGST be adjusted against SGST” is not an uncommon query among taxpayers nowadays. I want you to know that the Input Tax Credit under GST is a credit that suppliers can use to set off the taxation they have paid on the purchase of goods from the output tax on the sale of such goods. Hence, the tax will be charged on the value-added which helps avoid double taxation.

Input Tax concerning a taxpayer, means the tax levied on any supply of services or/and goods to him which are used in the furtherance or course of their business, but doesn’t include the tax paid under the composition levy.

Under the Goods and Service Tax Regime, the tax has been divided into three main parts –State Goods and Services Tax (SGST), Central Goods and Services Tax (CGST), and Integrated Goods and Services Tax (IGST). This bifurcation of taxes can be confusing as to how the output and input taxes are to be adjusted.

You can’t use CGST input tax credit to pay the SGST liability but you can use it to pay the liability under CGST. Moreover, you can use the balance of CGST credit available to pay the IGST liability.

Let’s understand this using an example:

Let’s assume that the supplier has the tax credit of Rs. 5 lacs and output SGST is Rs. 2 lacs, output IGST is Rs. 3 lacs, and output CGST is Rs. 1 lacs.

The amount will be transferred to the IGST Account after being reduced from the CGST Account to avail the ITC benefits of CGST to pay the IGST as displayed in the Monthly Return:

SGST: You can’t use the SGST input tax credit to pay the CGST liability but you can use it to pay the liability under SGST. Moreover, you can use the balance of SGST credit to pay the IGST liability.

IGST: After using the IGST input tax credit to make the IGST payment, you can use the remaining ITC to pay tax liability under SGST and CGST.

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Now you know the answer to your query on “Can CGST be adjusted against SGST”.