The Real-World Story: Surviving the ITC Waterfall

In the GST regime, working capital is king. A common mistake businesses make is assuming that having 1 Lakh in Output Tax and 1 Lakh in Input Tax Credit (ITC) means they pay zero cash. However, GST has strict "cross-utilization" firewalls. CGST and SGST cannot cross-pollinate. You cannot use State Tax credits to pay Central Tax liabilities, and vice versa. If you have a massive SGST input but high CGST output, you will be forced to pay cash for the CGST while your SGST credit sits trapped in your electronic ledger.

This calculator automates the exact hierarchy programmed into the government GST portal. The "Waterfall" rule mandates that IGST input must be exhausted entirely before you can touch CGST or SGST inputs. The algorithm handles this by first offsetting IGST inputs against IGST outputs, then cascading the remainder to CGST, and finally to SGST. Only after IGST is at zero will the calculator begin offsetting CGST against CGST, and SGST against SGST.

⚠️ Why This is for "Reference Only"

Proportional Allocation: When cascading remaining IGST input to offset CGST and SGST outputs, the GST law technically allows taxpayers to allocate that credit in any proportion they choose to minimize cash outflow. To maintain mathematical automation, this calculator applies residual IGST to CGST first, then SGST. For highly complex returns, a Chartered Accountant should optimize this split. Blocked Credits: This calculator assumes the ITC entered is 100% eligible. It does not account for Section 17(5) blocked credits (like food, motor vehicles, or works contract services).