Chapter VIII - Apportionment of tax and settlement of funds
Section 18
Section 18: Transfer of input tax credit
When a taxpayer uses IGST credit to pay central tax, Union territory tax or State tax, Section 18 reduces the IGST collected by that amount and requires the Central Government to transfer an equal amount to the account of the tax that was paid.
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Need advice on Section 18?
This article is for general information. Refer to the Integrated Goods and Services Tax Act, 2017 official text for the official provisions. If you need professional advice for your situation, contact Bizeneed.
Statutory text
Bare law
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 time as 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.
Introduction
Like Section 17, this is a settlement provision. The taxpayer's right to use IGST credit, and the order of utilisation, come from CGST section 49 and the equivalent State and UT provisions. Section 18 makes the money follow the credit.
Key takeaways
Credit used for central tax
Clause (a): when IGST credit pays central tax under CGST section 49(5), the Centre transfers an equal amount from the IGST account to the central tax account.
Credit used for UT or State tax
Clauses (b) and (c): when IGST credit pays Union territory tax under UTGST section 9 or State tax under the State GST Act, an equal amount goes to the Union territory tax account or to the appropriate State Government.
Meaning of appropriate State
For Chapter VIII, 'appropriate State' means the State or Union territory where the taxable person is registered or liable to be registered under the CGST Act.
How the transfers work
In each case the amount collected as integrated tax stands reduced by the credit used, and the Central Government transfers an equal amount in the manner and within the time prescribed.
For State tax, the amount is apportioned to the appropriate State Government and transferred to its account.
Practical relevance
Accurate registration data and correct set-off entries in returns determine which government receives funds. Errors in the tax head used for set-off can create mismatches that need correction under the return and payment provisions.
The credit utilisation sequence itself is set by CGST section 49 and the applied provisions (for UTGST, sections 9, 9A and 9B), not by Section 18.
Practical checklist
Do
- Follow the statutory order of credit utilisation under the CGST Act and the corresponding UTGST or SGST provision.
- Check that set-off entries in returns use the correct tax heads.
Frequently asked questions
Does Section 18 let me use IGST credit to pay SGST?
The permission and order come from CGST section 49 and the State and UT provisions. Section 18 deals with the transfer of funds once IGST credit has been used.
What is the 'appropriate State'?
The State or Union territory where the taxable person is registered or liable to be registered under the CGST Act.
Need help applying this provision to your situation?
Contact BizeneedLast updated 11 October 2026