A business can use IGST credit to pay its CGST or SGST. That is convenient for the taxpayer but leaves the money in the wrong Government account. Section 18 moves it: every rupee of IGST credit used to pay another tax is transferred to the account of that tax.
Key points
- Under section 18 of the IGST Act, 2017, when IGST credit is used to pay central tax, the amount is transferred from the IGST account to the central tax account.
- When IGST credit is used to pay State or UT tax, the amount is apportioned to the "appropriate State" — the State or UT where the taxpayer is registered or liable to be registered.
- The order in which IGST credit must be used is laid down in section 49 and section 49A of the CGST Act.
The provisions
18Transfer when IGST credit pays other taxes
Statutory text
On utilisation of credit of integrated tax availed under this Act for payment of,-
(a) central tax in accordance with the provisions of sub-section (5) of section 49 of the Central Goods and Services Tax Act, the amount collected as integrated tax shall stand reduced by an amount equal to the credit so utilised and the Central Government shall transfer an amount equal to the amount so reduced from the integrated tax account to the central tax account in such manner and within such timeas may be prescribed;
(b) Union territory tax in accordance with the provisions of section 9 of the Union Territory Goods and Services Tax Act, the amount collected as integrated tax shall stand reduced by an amount equal to the credit so utilised and the Central Government shall transfer an amount equal to the amount so reduced from the integrated tax account to the Union territory tax account in such manner and within such time as may be prescribed;
(c) State tax in accordance with the provisions of the respective State Goods and Services Tax Act, the amount collected as integrated tax shall stand reduced by an amount equal to the credit so utilised and shall be apportioned to the appropriate State Government and the Central Government shall transfer the amount so apportioned to the account of the appropriate State Government in such manner and within such time as may be prescribed.
Explanation .-For the purposes of this Chapter, " appropriate State " in relation to a taxable person, means the State or Union territory where he is registered or is liable to be registered under the provisions of the Central Goods and Services Tax Act.
Statutory text as published on the CBIC tax information portal, as on 03.10.2026; the numbered notes record each amendment. Official source
Common questions
- Can IGST credit be used to pay CGST and SGST?
- Yes, in the order set by sections 49(5) and 49A of the CGST Act; section 18 of the IGST Act then transfers the matching amount to the Central or State account.
Commentary and case notes checked against the judgments and CBIC sources on 04.10.2026.
What it means
IGST credit is used first against IGST, and then against central tax and State or UT tax, under section 49(5) of the CGST Act read with section 49A. Each time it pays central tax (clause (a)), UT tax (clause (b)) or State tax (clause (c)), the IGST collected is reduced by that amount and the money is transferred to the matching account — for State tax, to the "appropriate State" defined in the Explanation as the State or UT where the taxpayer is registered or liable to be registered.
This is how a destination State receives tax on an inter-State purchase made by a business in it: the IGST paid by the supplier is credited to the buyer, the buyer uses it to pay State tax on its own sales, and section 18 moves the money to the buyer's State.