Portal Flexibility vs Statutory Discipline: Why Section 49(5) Still Governs ITC Utilisation

Portal is not law. And this distinction matters more than ever.
 

From January-2026, the GST Portal is updating Table 6.1 of GSTR-3B to allow taxpayers to discharge IGST liability using CGST and SGST ITC in any sequence, once IGST ITC is fully exhausted. Sounds flexible.But here’s the legal reality we cannot ignore.

What the law actually says

Section 49(5) of the CGST Act prescribes a statutory order for utilisation of input tax credit:

-IGST ITC must first be utilised for IGST.
-Thereafter, CGST ITC may be utilised for IGST.
-SGST ITC can be utilised for IGST only where CGST ITC is not available, as expressly provided in the proviso to Section 49(5).

In substance, once IGST ITC is exhausted, the law mandates CGST-first utilisation for IGST liability, and only thereafter permits SGST utilisation.

What is changing on the portal

From January-2026, the portal will no longer hard-restrict the sequence and may allow taxpayers to use CGST and SGST ITC in any order for IGST payment. This is a system-level change in validation and workflow, intended to provide filing flexibility.

But let’s be very clear
-This is not a change in law.
-Portal functionality cannot override statutory provisions.
-System permission does not automatically translate into legal compliance.
 

Until the proviso to Section 49(5) is formally amended by the legislature, utilisation must remain within the framework of the Act, regardless of what the portal allows. Because in GST, litigation doesn’t arise from what the portal permits - it arises from what the law mandates.
 

Practical takeaway for taxpayers & professionals Even if the portal allows SGST ITC utilization for IGST while CGST ITC is available, the legally safe approach remains: IGST ITC → CGST ITC → SGST ITC
Flexibility on the portal is welcome, but compliance lives in the statute, not the software.

Disclaimer – This advisory has been prepared solely for educational purposes. It is not a legal advice hence, taxpayer must rely on statutory provisions for compliance requirements. For any official or legal purpose, please refer to the applicable GST laws, rules, and notifications.