The Government has outlined measures to strengthen the apportionment and settlement of Integrated Goods and Services Tax (IGST) revenue between the Centre and the States.
The details were provided by the Ministry of Finance in its response to Rajya Sabha Unstarred Question No. 1838, answered on August 4, 2026.
The response has arrived amid questions of issues sought by States for IGST settlement, including possible discrepancies, delays and anomalies in the settlement process.
Committee of Officers Established to Review IGST Settlement
The constitution of a Committee of Officers on IGST Settlement has been approved by the GST Council, at its 54th meeting conducted on September 9, 2024, in New Delhi.
After this decision, a committee including officers from the Central Government and various State Governments, including Kerala, was formed to analyse problems of IGST settlement.
The committee was given a task of advising measures to enhance the current settlement procedure. Its scope consists of proposals concerning-
- Legislative amendments
- System enhancements
- Refinement of the formula for apportionment of IGST balances
- Treatment of both positive and negative balances in the IGST account
The response from the Government shows that the motive of the review is to address operational problems in the settlement procedure and make the process perfect.
GST Department Issues SOP to Address Abnormal ITC Reversals
The rollout of a Standard Operating Procedure (SOP) for dealing with abnormal reversals of Input Tax Credit (ITC) is among the key suggestions of the Committee of Officers.
As per the Government, unusual ITC reversals had been contributing to irregularities in the IGST settlement procedures.
The implementation of an explained SOP is thus intended to furnish a structured approach for managing these matters and lessen settlement-pertinent irregularities.
Amendments to Ineligible and Time-Barred Credit
The committee suggested aligning ineligible credit and time-barred credit with the structure of Form GSTR-3B.
As part of this practice, particular revisions were approved for the related STL categories-
- STL 1.06, mainly including domestic ineligible credit, and STL 1.10, relating to ineligible credit concerning imports, were approved for merger.
- STL 1.11 was authorised to be merged with STL 1.07.
Such revisions bring the treatment of these credits in line with the reporting structure followed in GSTR-3B.
More Clarity in GST Rules
The committee suggested incorporating the related section numbers, rule numbers and sources in the GST Rules.
Apart from that, the Government said that required clarifications were suggested in fields where the current rules do not hold accuracy.
It can help reduce ambiguity in the interpretation and execution of provisions related to IGST settlement.
GST Settlement of Fund Rules, 2026 Notified
The report of the committee was presented before the GST Council at its 55th meeting.
Afterwards, following approval by the GST Implementation Committee, the Goods and Services Tax Settlement of Fund Rules, 2026 were notified and published in the Gazette on March 30, 2026.
The Government has verified that the Standard Operating Procedure suggested by the Committee of Officers has been implemented.
What it Signifies for IGST Settlement
The response of the Government shows a measure to address practical problems in the IGST settlement procedure via a combination of procedural, systemic and rule-based changes.
The measures mainly concentrate on abnormal ITC reversals, classification of ineligible and time-barred credit, effective clarity in the Rules, and improvements in the formula for apportionment of IGST balances.
Amendments for States and tax administrators are crucial because the IGST settlement procedure holds an important role in determining the distribution and settlement of GST revenue.
Key Highlights
- CBIC Forms Officers’ Committee on IGST Settlement Following 54th GST Council Recommendations
- The committee included officers from the Centre and various States, including Kerala.
- New SOP Implemented for Handling Abnormal Input Tax Credit Reversals
- Certain STL categories relating to ineligible credit were approved for merger.
- GST Rules are being strengthened via references to relevant sections, rules and sources.
- Clarifications have been given in areas where existing Rules lacked precision.
- On March 30, 2026, the Goods and Services Tax Settlement of Fund Rules, 2026 were notified.
- The Government has said that the committee’s recommendations have been incorporated into the settlement framework.
Read Also: GST Collection in July 2026 Rises 15.4% to Over Rs. 2.11 Lakh Crore
The circulation furnishes an insight into how the Government has responded to issues surrounding IGST settlement and the measures rolled out to make the process consistent and transparent.
Read About IGST Revenue Settlement 2026
