GST Set off Rules: The ultimate Guide with chart and procedure (2023)

What is GST Set off means?

In Goods and service Tax system taxpayer has to pay the tax to the government on a monthly or quarterly basis. Thus, there are two options to pay these taxes.

The first one is to deposit the payment in the bank and you get credit in your cash ledger. This ledger balance can be debited to pay the required tax payment.

Secondly, the taxpayer can claim the input tax credit on the various purchases he makes during the period. This input tax credit(ITC) gets credited in his credit ledger. Therefore, the taxpayer can utilize this credit to pay the taxes against supplies made. Hence, utilization of cash and input tax credit towards payment of GST Tax is called set off.

What are GST set off rules?

There are certain rules and conditions for utilizing this cash and credit balances under GST. This new gst set off rules will be applicable to set off GST in the nearby future. Therefore, the taxpayer must follow this gst set off order while utilizing available input tax credit. Here is the complete chart showing, how to set off the Input Tax credit for GST payment.

GST Set off Rules: The ultimate Guide with chart and procedure (1)

Let us understand gst set off rules with chart in more detail.

  • (I) At the first, you shall utilize the complete (Integrated Goods and Service Tax) IGST input tax credit available to setoff IGST output liability on account of integrated tax on outward supplies.

For eg. suppose you have a liability of Rs.1 lakh and you have IGST ITC = Rs. 1.25 lakh. Here you need to set off all Rs. 1lakh liability from IGST balance only.

  • (II) After utilizing (I) you must utilize the balance of IGST ITC to sett of the liability of CGST.
  • (III) After utilizing (I) and (III) you must utilize the balance of IGST ITC to sett of the liability of SGST or UTGST(Union Territory Goods and Service Tax.
  • (IV and (V) – After utilizing all your available IGST input tax credit, you can utilize CGST ITC to set off the liability of IGST and CGST only. You can not use CGST ITC to set off the SGST or UTGST liability.
  • (VI) and VII) – The input tax credit of SGST or UTGST can be utilized for payment of IGST and SGST or UTGST Only. One can not use SGST/UTGST ITC for making payment of CGST.

Limitations to set off Input Tax Credit

The government has put restrictions to use the input tax credit available in the Credit ledger. These limitations restrict the taxpayer to utilize full input tax credit. This is applicable from 01st January 2021 vide notification No. 94/2020-Central Tax DT. 22.12.2020.

Therefore, according to this rule, the taxpayer shall not use more than 99% Input tax credit to set off the total tax liability. In other words, 1% tax liability must be set off from the cash ledger.

For eg. The total liability is Rs. 10 lakh for the month of January 2021. The taxpayer can utilize RS. 99,000/- from ITC ledger. Balance Rs. 1000/- must be utilized from the Cash ledger to pay the total tax liability.

GST set off example with chart

  • Table A is the example of tax liability and input tax credit in hand for any given period.
GST Set off Rules: The ultimate Guide with chart and procedure (2)
  • Table B shows, how the set off can take place as your Option No. 1
GST Set off Rules: The ultimate Guide with chart and procedure (3)
  • Table C shows, how the set off can take place as your Option No. 2. You can choose either table B or table C to utilize the Input Tax credit.
GST Set off Rules: The ultimate Guide with chart and procedure (4)

As of now, GST common portal supports only, the order of utilization of input tax credit as in the past i.e as per section 49A and 49B of CGST Act. Therefore, the taxpayer may continue to utilize their input tax credit as per the old method untill the new order comes.

How to set off liability from Cash Ledger?

You shall deposit the cash in particular ledger while generating online challan only. For eg., if you need to pay the liability against IGST outward supplies, then you should make the payment under IGST head. Cash ledger will get credit as per the amount fed in the GST challan payment. Later, you can debit this particular head to set off the liability from the cash ledger.

Procedure to set off ITC in GST Return

The ITC set off to be done in GSTR 3B return. GSTR 3B is a monthly summary and every taxpayer has to file it by 20th of succeeding month.

Before filing GSTR 3B filing you have to calculate how much tax is payable and how much ITC you have. This enables you to know, how much set off can be done from the Input tax credit ledger. Because balance you need to pay through your Cash ledger. Thus, You can do gst set off calculation in excel prior to beginning filing of GSTR 3B.

GST portal is automatically suggesting possible set off options based on the GST rules. Thus, you need to have to worry much about gst set off order. However, one can change this set off order and edit the suggested figures.

We are going to show you the actual set off of ITC on GST portal. In other words, you will see the actual format of setting off input tax credit on GST portal.

So lets begin !

GST Set off Rules: The ultimate Guide with chart and procedure (5)

1.Once you click “Proceed to payment” button in GSTR 3B, you will see below cash ledger and credit ledger balances on your screen.

GST Set off Rules: The ultimate Guide with chart and procedure (6)

2. Above picture gives you the available balance in your cash ledger. This includes integrated tax, central tax, state or Territory tax, cess, etc.

3. Besides that, you can see see the interest and late fees available which you have deposited by creating GST challan on GST portal.

GST Set off Rules: The ultimate Guide with chart and procedure (7)

4. Similarly, the above image give you the balances of credit ledger towards the Input tax availed on various purchases of goods and services. Thus this table will also give you the ITC breakup according to their head.

GST Set off Rules: The ultimate Guide with chart and procedure (8)

5. Based on the available balance, GST system will automatically fill the columns, from available balances to meet the GST liability. The system will first utilize all the ITC as per the applicability as per GST rules. However, you can edit these fields and change the values if you do not want to accept it as system suggested.

6. This may be useful when you think the ITC is available but not sure whether to utilize it or not. Therefore there may be cases where you do not want to set off the ITC suggested by the system.

7. Further, if the ITC is not sufficient then you will have to click on the Create challan to deposit the cash. Thereafter, you need to click on “make payment/post credit to ledger” to update the ledgers with the latest balance. The System will show you the cash balance required as shown in the below picture.

GST Set off Rules: The ultimate Guide with chart and procedure (9)

8. Without setting off the liability you will not able to file this return. Thus, once you meet your liability with the required cash and credit balance and set off the figures completely the “proceed to file ” button will be activated.

GST Set off Rules: The ultimate Guide with chart and procedure (10)

GST set off entry in Tally ERP 9

If you are looking for how to pass GST set off entry in tally erp 9 then you may refer this tally erp article. However, this entry will be only the accounting entry and set off cannot be done in GSTR 3b in tally itself.

Thus, if you are exporting json file from tally erp 9, then you can upload all rest except set off entries. However, kindly check the tally article if it is timely updated. because if it is not updated on time to time basis, you may get confuse.

We have given this gst set off formula as per the latest notification as specified in gst set off rules block. You may also refer to the Related article at ClearTax website. They have provided the gst set off procedure very clearly and easy to understand.


This is the overview of Circular No. 98/17/2019-GST dt.23.04.2019 providing clarification on input tax credit set off rules.

Past Structure

The section, 49 was amended to insert sub section 49A and 49B vide central goods and service tax amendment ACt 2018. The amended rules came into force from 01.02.2019.

However, the taxpayer faces issues to bring into effect section 49A. This is because as per section 49A, the order of utilization of Input tax credit of IGST in a particular order. Thus, resulting in accumulation of one credit say SGST credit in electronic credit ledger. Therefore, in order to discharge the CGST liability the taxpayer has to pay the tax through the cash ledger only.

Current Structure:

Rule 88A is inserted in CGST Rules 2017 in the exercise of the powers under Section 49B vide notification no. 16/2019-Central Tax, dated 29th March 2019. According to this rule utilization of input tax credit of IGST can be used to set off the liability of CGST and SGST or UTGST. However, the condition is that the credit of IGST must be completely finished before utilizing the credit of CGST and SGST or UTGST.

Important Links

  • GST Payment online process and status checking with due date
  • Interest for late payment of tax with calculation under GST system


What are the set off rules under GST? ›

As per the earlier GST input set off rules, CGST & SGST credit can be utilized to set off the liability of CGST & SGST, respectively and balance can be paid through IGST credit. And the taxpayer has to pay nothing in cash.

How do you set offset liabilities in GST? ›

Press the OFFSET LIABILITY button to pay off the liabilities. The OFFSET SUCCESSFUL BOX will appear on the Screen. Go back to the Return Filing Month and select the one for which we are filing the GSTR Form-3B. The TAB 6: Payments of Taxes will show the balance liability as zero now.

What is Rule 42 of GST rules? ›

There are certain instances in the GST Act where the Reversal of ITC taken while filing GST Returns is required. A Tax payer is required to reverse excess ITC taken or ITC wrongly availed while filing the GST Returns.

What is rule 34 of GST rules? ›

The rate of exchange for the determination of the value of taxable goods or services or both shall be the applicable reference rate for that currency as determined by the Reserve Bank of India on the date of time of supply in respect of such supply in terms of section 12 or, as the case may be, section 13 of the Act.

What is the $75 GST rule? ›

Tax invoices are not required where the GST-exclusive value of the transaction does not exceed $75 (that is, a GST-inclusive price of $82.50) or if the goods or services supplied are GST-free, such as many food items.

How to do GST audit step by step? ›

GST Audit Checklist
  1. 1) Turnover based audit. ...
  2. 2) General audit. ...
  3. 3) Special audit. ...
  4. 1) Cross verifying GSTR 3B with GSTR 1 & GSTR 2A. ...
  5. 2) Checking the format of the invoice. ...
  6. 3) Input Tax Credit (ITC) reversal for non-payment within 180 days. ...
  7. 4) Reconciling e-Way Bills with invoices.
Mar 29, 2023

How long do you have to make a GST adjustment? ›

If you're entitled to a GST credit or indirect tax refund, you need to claim it within four years. Your entitlement to a GST credit ends four years from the due date of the earliest activity statement in which you could have claimed it (setting aside any requirement to hold a tax invoice).

What is the rule of offsetting? ›

The offset rule is a method to simplify the calculation of lump sum damage awards to compensate victims for an expected lost future flow of income.

What is GST offset summary? ›

Offset is one of main process in GST filing which is included in the form GSTR-3B. The payment option is available only in GSTR-3B. GSTR-3B is called consolidated summary of Sales and Purchase.

How do I set-off credit ledger in GST? ›

Finally, ITC is utilized in the following sequence to set off the IGST liability:
  1. ITC standing under IGST is used to set off IGST output liability.
  2. ITC standing under CGST is used to set off the remaining IGST output liability.
  3. Finally, ITC standing under SGST is used to set off the remaining IGST output liability.
Jul 2, 2019

What is Rule 48 4 of GST rules? ›

(4) The invoice shall be prepared by such class of registered persons as may be notified by the Government, on the recommendations of the Council, by including such particulars contained in FORM GST INV-01 after obtaining an Invoice Reference Number by uploading information contained therein on the Common Goods and ...

What is Rule 36 of GST? ›

CGST Rule 36(4) is amended to remove 5% additional ITC over and above ITC appearing in GSTR-2B. From 1st January 2022, businesses can avail ITC only if it is reported by the supplier in GSTR-1/ IFF and it appears in their GSTR-2B. From 1st January 2022, ITC claims will be allowed only if it appears in GSTR-2B.

What is Rule 46 of GST Act? ›

The invoice referred to in rule 46, in the case of the taxable supply of services, shall be issued within a period of thirty days from the date of the supply of service: Provided that where the supplier of services is an insurer or a banking company or a financial institution, including a non-banking financial company, ...

What is Rule 43 of GST? ›

Rule 43: Reversal of ITC on capital goods

The ITC is in relation to capital goods that have been used exclusively for non-business purposes or for making exempt outward supplies. OR. The ITC is in relation to capital goods that have been used exclusively for making supplies other than exempt supplies.

What is Rule 72 GST? ›

Duplication of claims of input tax credit in the details of inward supplies shall be communicated to the registered person in FORM GST MIS-1 electronically through the common portal.

What is Rule 55 4 of GST? ›

As per Rule 55(4), where the goods being transported are for the purpose of supply to the recipient but the tax invoice could not be issued at the time of removal of goods for the purpose of supply, the supplier shall issue a tax invoice after delivery of goods.

What is GST Rule 100? ›

According to Rule 100 of Central Goods and Service Tax Act, 2017 as passed by Lok Sabha : The order of assessment made under sub-section (1) of section 62 shall be issued in FORM GST ASMT-13 .

What is GST Rule 68? ›

Rule 68 – Notice to non-filers of returns

A notice in FORM GSTR-3A shall be issued, electronically, to a registered person who fails to furnish return under section 39 or section 44 or section 45 or section 52.

What is GST Rule 127? ›

Where the proper officer is of the view that a person is liable to a penalty and the same is not covered under any proceedings under section 62 or section 63 or section 64 or section 73 or section 74 or section 129 or section 130, he may issue an order levying such penalty after giving a reasonable opportunity of being ...

Which Excel tool for GST reconciliation? ›

GSTplus Reconciliation Utility is excel based easy to use software through which you can reconcile your purchase data GSTR-2A in few seconds. It highlights all mismatch invoices with proper suggestion to resolve. You can copy past data from Tally / ERP/ Other software in simple format.

What is GST 2B reconciliation? ›

GSTR 2B reports data in a way that allows taxpayers to easily and conveniently reconcile ITC with books of accounts and records. It also assists them in compiling all of the information.

How do I check my GST balance? ›

Manual > Electronic Cash Ledger
  1. Access the URL. ...
  2. Click the Services > Ledgers > Electronic Cash Ledger command.
  3. The Electronic Cash Ledger page is displayed. ...
  4. Note: You can click the link for the amount displayed under Cash Balance as on date to view the summary of the Cash Balance.

What is GST audit in simple words? ›

Audit under GST involves an examination of records, returns, and other documents maintained by a GST registered person. It also ensures the correctness of turnover declared, taxes paid, refund claimed, input tax credit availed, and assesses other such compliances under GST Act to be checked by an authorized expert.

What to check while doing GST audit? ›

the law? Check if the input tax credit is availed, the GSTIN is mentioned correctly on the supplier's tax invoice. Check if there is any credit which is availed is falling under the blocked input tax credit. Check if there any transition credit availed in GST TRAN -1, if yes is the assessment is complete.

How do you record GST in accounting? ›

Journal Entries Under GST
  1. Purchase Transactions (Input Supplies of Goods or Services) A.Intra-State Purchase. ...
  2. Sale Transactions (Outward Supplies of Goods and Services) A. ...
  3. Set Off of Input Credit Against Out Tax Liability of GST. ...
  4. Reverse Charge Transactions in GST. ...
  5. Refunds in Case of Export of Goods and Services: ...
  6. Imports.
Dec 23, 2022

What is the 4 year rule? ›

What is the 4-year rule in Town Planning? The 4-year rule in town planning allows property owners and landowners to gain immunity from planning enforcement action by the local planning authority for unauthorised residential development that has been in place for at least four years.

What is the time limit for correcting GST errors? ›

You must correct a debit error on an activity statement lodged within 12 months of the original due date of the activity statement where the error occurred. For a GST group, the current GST turnover is calculated for the group as a whole.

How far back can you amend a GST return? ›

Missed Input Tax Credits (ITCs)

Legislatively, a GST / HST registrant is entitled to retroactively claim ITCs on a current return for previously missed credits. For most registrants, this claim can be any time within four years.

What are examples of offsetting? ›

An offset involves assuming an opposite position in relation to an original opening position in the securities markets. For example, if you are long 100 shares of XYZ, selling 100 shares of XYZ would be the offsetting position.

Why offsetting is not allowed? ›

It is usually not possible to achieve offset for the asset and the liability because, in most cases, the entity cannot assert that the asset will be used to settle the liability. The asset will rise and fall as the entity places further cash on deposit or withdraws cash to settle other obligations.

What is right to set off and offset? ›

The right of setoff is a legal right by a debtor to reduce the amount owed to a creditor by offsetting against it any amounts owed by the creditor to the debtor. For example, a bank can seize the amount in a customer's bank account to offset the amount of an unpaid loan.

What is GST reversal Rule 37? ›

What is Rule 37 of GST? To simplify, if a registered taxpayer has availed ITC on the supply of goods and/or services but has yet to pay for the supply along with tax payable on it within 180 days of the issue of the invoice, the ITC claim will be reversed.

What is adjustment and refund of GST? ›


Therefore, Proper Officer must confirm, whether such dues are unpaid, and not stayed by the appellate authority or Tribunal or Court. He must give opportunity to the taxpayer to prove that dues are stayed or paid before sanction of refund, by producing relevant documents and challans.

What is the format of refund in GST? ›

Any taxpayer registered under GST can file for a refund using form RFD–01 or RFD–01A. Refund will be initiated only when the refund amount exceeds thousands of rupees. As stated above, RFD–01 is an application for online processing of refund under GST.

How do you reconcile cash and credit ledger in GST? ›

Copy your data from the GSTR-3B/1-PDF file and paste the same in the sheet given in the file. Provide details as per tally. Enter GST payment details in Cash ledger. Enter Transitional Credit/Refund Claimed in Credit Ledger.

What is Rule 101 4 of GST? ›

(4) The proper officer may inform the registered person of the discrepancies noticed, if any, as observed in the audit and the said person may file his reply and the proper officer shall finalise the findings of the audit after due consideration of the reply furnished.

What is Rule 44 6 of GST? ›

Rule 44 (6) CGST Rules

for capital goods held in stock, the input tax credit involved in the remaining useful life in months shall be computed on the pro-rata basis, taking the useful life as five years.

What is Rule 34 4 of GST? ›

(4) Any registered person who issues a debit note in relation to a supply of goods or services or both shall declare the details of such debit note in the return for the month during which such debit note has been issued and the tax liability shall be adjusted in such manner as may be prescribed. Explanation.

What is Rule 78 GST? ›

Section 78 – Initiation of recovery proceedings

Provided that where the proper officer considers it expedient in the interest of revenue, he may, for reasons to be recorded in writing, require the said taxable person to make such payment within such period less than a period of three months as may be specified by him.

What is GST Rule 86 3? ›

Rule 86 – Electronic Credit Ledger

(3) Where a registered person has claimed refund of any unutilized amount from the electronic credit ledger in accordance with the provisions of section 54, the amount to the extent of the claim shall be debited in the said ledger.

What is Rule 32 5 of GST? ›

Rule 32(5) restricts Input Tax Credit availment only on the purchase of second-hand goods, which are further sold under margin scheme. Hence, Input tax credit can be availed on all business expenses like rent, advertisement, commission, professional expenses, etc.

What is Section 62 of the GST? ›

Section 62 of Central Goods and Service Tax Act,2017, come into effect when a taxable person fails to file returns, as per requirements under section 39; or final return on cancellation of registration under section 45 of the Act, or; as the case may be.

What is Section 44 of GST? ›

Notes on Section 44 – GST Annual Return. As per section sub-section (1) of section 44 of CGST Act 2017 read with sub-rule (1) of Rule 80 of the Central GST Rules 2017, every person registered under GST shall file an annual return in FORM GSTR-9 for every financial year on or before 31st December.

What is RCM set off in GST? ›

This means that the GST will have to be paid directly by the receiver instead of the supplier. The registered buyer who has to pay GST under reverse charge has to do self-invoicing for the purchases made. In intra-state purchases, CGST and SGST have to be paid under reverse charge mechanism (RCM) by the purchaser.

What is as per Rule 31 of the Cgst rules? ›

Section 31 – Tax invoice

Provided that the Government may, on the recommendations of the Council, by notification, specify the categories of goods or supplies in respect of which a tax invoice shall be issued, within such time and in such manner as may be prescribed. (b) tax invoice may not be issued.

What is Regulation 70 GST? ›

Item 1 in regulation 70-5.02(2) provides that the service of opening, issuing, closing, operating, maintaining or performing a transaction in respect of an account by a financial supply facilitator is a reduced credit acquisition.

What is Rule 36 4 of the CGST Rules 2017? ›

Rule 36(4) provides a restriction to claim input tax credit. The taxpayer can claim input tax credit on the invoice which are appearing in GSTR-2A. For that the supplier must upload all his outward supply invoices in his GSTR-1 appropriately.

What is the difference between RCM and GST? ›

The Reverse Charge Mechanism (RCM) is the process of GST Payment by the receiver instead of the supplier. In this case, the liability of tax payment is transferred to the recipient/receiver instead of the supplier.

What is Section 9 3 and 9 4 of GST? ›

- Under section 9(3) few goods and services are specifically notified by way of notification in which case tax is to be paid under reverse charge like in case of advocates, Goods transport agency etc. - Under 9(4) if supplies are received from unregistered dealer then tax is to be paid in reverse charges.

How many types of RCM are there? ›

There are two types of RCM provided under GST law: Section 9(3) of CGST Act : Supply of specified goods / services. Section 9(4) of CGST Act : Supply of specified goods / services made by unregistered persons to the specified registered persons.

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