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Simplified: Manner of Utilisation of ITC (Head wise) for Payment under GST with Illustrations

In this article, we have tried to simply the Rules and Regulations regarding Cash and Credit ledger and how payment of GST liability can be discharged with the help of illustrations.


We will discuss sequence of head wise (IGST, CGST, SGST) ITC utilisation for respective Payments in different Heads. We will also discuss various sources for deposit of money in Cash Ledger including various modes. Do you know even Credit Card can be used to deposit money in Cash Ledger. (Legal Text is also placed at the end of the article).


General Rules (Section 49, 49A, 49B, Rule 86 to 88A)


1. There are three type of ledgers regarding payment and liability in GST

a. Electronic Liability Register (GST-PMT-01)

b. Electronic Credit Register(GST-PMT-02)

c. Electronic Cash Register (GST-PMT-03)


2. Payment of Tax on account of RCM, by Composition Dealer, TDS & TCS can only be made through Electronic Cash Ledger only.


3. Only Payment of Tax & Cess that is also other than RCM, Composition Dealer, and TDS/TCS can be made through ITC. All other payments including Tax, Penalty, Interest, Fee etc. can be made through Electronic Cash Register.


Rules regarding Utilisation of ITC (Section 49, 49A, 49B, Rule 86 to 88A)


1. First IGST will be used for payment of IGST then remaining amount if any can be used for payment for CGST or SGST/UTGST in any order (Rule 88A).


2. First CGST will be used for payment of CGST then remaining amount if any for IGST.


3. First SGST/UTGST will be used for payment of SGST/UTGST then remaining amount if any for IGST.


4. Further, SGST/UTGST can only be utilised for payment of IGST if balance in CGST is zero.


5. For payment of CGST, balance of CGST can only be utilised after balance in IGST becomes zero. Similarly, for payment of SGST/UTGST, balance in SGST/UTGST can only be utilised once balance in SGST/UTGST becomes zero.


6. Payment of cess can be made using ITC availability in Cess only.


7. CGST can’t be utilised for payment of SGST/UTGST and vice versa.


Illustrations


Ilustration-1

Particulars

Output GST Payable

Balance in Credit Legder

IGST

1000

1200

CGST

500

400

SGST

500

400

Total

2000

2000

Utilisation of Credit (Applying Rule 88A read with Circular:98/17/2019)

Particulars

Output Tax

Utilisation of Credit

Cash Payment

Balance of ITC

IGST

1000

1000 (IGST)

0

0

CGST

500

500 (100 IGST, 400 CGST)

0

0

SGST

500

500 (100 IGST, 400 SGST)

0

0

Total

2000

2000

0

0


Illustration-2

Particulars

Output Tax Payable

Balance in Credit Ledger

IGST

1000

700

CGST

800

1000

SGST

800

1000

Total

2600

2700

Utilisation of Credit

Particulars

Output Tax Payable

Credit Utilisation

Cash

Closing Balance

IGST

1000

1000(700 IGST,200 CGST,100 SGST)

0

0

CGST

800

800(CGST)

0

0

SGST

800

800(SGST)

0

100

Total

2600

2600

0

100

Illustration-3

Particulars

Output GST Payable

Credit Balance Available

IGST

1000

700

CGST

800

900

SGST

800

900

Total

2600

2500


Particulars

Output Tax Payable

Credit Utilisation

Cash Payment

Closing Balance of ITC

IGST

1000

900(700 IGST,100 CGST,100 SGST)

100

0

CGST

800

800 (CGST)

0

0

SGST

800

800 (SGST)

0

0

Total

2600

2500

100

0

We hope we have tried to cover maximum scenario for explaining the utilisation of ITC. In case, you have any query , please raise in comment section, we will be pleased to discuss.


How Money can be deposited in Electronic Cash Ledger

Amount in Electronic Cash Ledger can be deposited by generation of a challan in FORM GST PMT-06 on the common portal and enter the details of the amount to be deposited by him towards tax, interest, penalty, fees or any other amount.

The deposit shall be made through any of the following modes, namely:-

(i) Internet Banking through authorised banks;

(ia) Unified Payment Interface (UPI) from any bank;

(ib) Immediate Payment Services (IMPS) from any bank;]

(ii) Credit card or Debit card through the authorised bank;

(iii) National Electronic Fund Transfer or Real Time Gross Settlement from any bank; or

(iv) Over the Counter payment through authorised banks for deposits up to ten thousand rupees per challan per tax period, by cash, cheque or demand draft.


However, condition of over counter of Cash Deposit of Rs. 10,000 will not apply to Government Departments and other specified persons.


Further, Provider of OIDAR and Online Money Gaming from outside India may make the deposit through international money transfer through Society for Worldwide Interbank Financial Telecommunication payment network.


It is hereby clarified that for making payment of any amount indicated in the challan, the commission, if any, payable in respect of such payment shall be borne by the Taxpayer.


Any amount deducted under section 51 or collected under section 52 and claimed by the registered taxable person from whom the said amount was deducted or, as the case may be, collected shall be credited to his electronic cash ledger.


Rules regarding Transfer of Cash Balance Available in One Distinct Person to another


As per Section 49(10), Balance available in cash ledger of one branch/factory (separately Registered) can be transferred to cash ledger of another branch/factory (separately Registered) being distinct persons in terms of Section 25(4)/(5) (i.e. different Registrations having same PAN) by filing Form GST-PMT-09.


However, balance cannot be transferred if unpaid liability is there in Electronic Liability Register of the Transferor factory/branch.


Order of Discharge of Dues


(a) Self-assessed tax, and other dues related to returns of previous tax periods;

(b) Self-assessed tax, and other dues related to the return of the current tax period;

(c) any other amount payable under this Act or the rules made thereunder including the demand determined under section 73 or section 74 .


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Legal Texts of Relevant Sections


Section 49. Payment of tax, interest, penalty and other amounts.-

(1) Every deposit made towards tax, interest, penalty, fee or any other amount by a person by internet banking or by using credit

or debit cards or National Electronic Fund Transfer or Real Time Gross Settlement or by such other mode and subject to such conditions and restrictions as may be prescribed , shall be credited to the electronic cash ledger of such person to be maintained in such manner as may be prescribed .

(2) The input tax credit as self-assessed in the return of a registered person shall be credited to his electronic credit ledger, in

accordance with [ section 41 2 [***]], to be maintained in such manner as may be prescribed.

(3) The amount available in the electronic cash ledger may be used for making any payment towards tax, interest, penalty, fees or any other amount payable under the provisions of this Act or the rules made thereunder in such manner and subject to such conditions and within such time as may be prescribed .

(4) The amount available in the electronic credit ledger may be used for making any payment towards output tax under this Act or under the Integrated Goods and Services Tax Act in such manner and subject to such conditions [and restrictions] within such time as may be prescribed.

(5) The amount of input tax credit available in the electronic credit ledger of the registered person on account of-

(a) integrated tax shall first be utilised towards payment of integrated tax and the amount remaining, if any, may be utilised

towards the payment of central tax and State tax, or as the case may be, Union territory tax, in that order;

(b) the central tax shall first be utilised towards payment of central tax and the amount remaining, if any, may be utilised towards the payment of integrated tax;

(c) the State tax shall first be utilised towards payment of State tax and the amount remaining, if any, may be utilised towards payment of integrated tax

[ Provided that the input tax credit on account of State tax shall be utilised towards payment of integrated tax only where the balance of the input tax credit on account of central tax is not available for payment of integrated tax;];

(d) the Union territory tax shall first be utilised towards payment of Union territory tax and the amount remaining, if any, may be utilised towards payment of integrated tax:

[ Provided that the input tax credit on account of Union territory tax shall be utilised towards payment of integrated tax only where the balance of the input tax credit on account of central tax is not available for payment of integrated tax;]

(e) the central tax shall not be utilised towards payment of State tax or Union territory tax; and

(f) the State tax or Union territory tax shall not be utilised towards payment of central tax.

(6) The balance in the electronic cash ledger or electronic credit ledger after payment of tax, interest, penalty, fee or any other amount payable under this Act or the rules made thereunder may be refunded in accordance with the provisions of section 54 .

(7) All liabilities of a taxable person under this Act shall be recorded and maintained in an electronic liability register in such manner as may be prescribed .

(8) Every taxable person shall discharge his tax and other dues under this Act or the rules made thereunder in the following order, namely:-

(a) self-assessed tax, and other dues related to returns of previous tax periods;

(b) self-assessed tax, and other dues related to the return of the current tax period;

(c) any other amount payable under this Act or the rules made thereunder including the demand determined under section 73 or section 74 .

(9) Every person who has paid the tax on goods or services or both under this Act shall, unless the contrary is proved by him, be deemed to have passed on the full incidence of such tax to the recipient of such goods or services or both.

[(10) A registered person may, on the common portal, transfer any amount of tax, interest, penalty, fee or any other amount

available in the electronic cash ledger under this Act, to the electronic cash ledger for,––

(a) integrated tax, central tax, State tax, Union territory tax or cess; or

(b) integrated tax or central tax of a distinct person as specified in sub-section (4) or, as the case may be, sub-section (5) of section 25 , in such form and manner and subject to such conditions and restrictions as may be prescribed and such transfer shall be deemed to be a refund from the electronic cash ledger under this Act:

Provided that no such transfer under clause (b) shall be allowed if the said registered person has any unpaid liability in his electronic liability register.]

(11) Where any amount has been transferred to the electronic cash ledger under this Act, the same shall be deemed to be deposited in the said ledger as provided in subsection (1).]

[(12) Notwithstanding anything contained in this Act, the Government may, on the recommendations of the Council, subject to such conditions and restrictions, specify such maximum proportion of output tax liability under this Act or under the Integrated Goods and Services Tax Act, 2017 which may be discharged through the electronic credit ledger by a registered person or a class of registered persons, as may be prescribed]

Explanation .-For the purposes of this section,-

(a) the date of credit to the account of the Government in the authorised bank shall be deemed to be the date of deposit in the electronic cash ledger;

(b) the expression,-

(i) "tax dues " means the tax payable under this Act and does not include interest, fee and penalty; and

(ii) "other dues" means interest, penalty, fee or any other amount payable under this Act or the rules made thereunder


Section 49A. Utilisation of input tax credit subject to certain conditions.-

Notwithstanding anything contained in section 49 , the input tax credit on account of central tax, State tax or Union territory tax

shall be utilised towards payment of integrated tax, central tax, State tax or Union territory tax, as the case may be, only after the

input tax credit available on account of integrated tax has first been utilised fully towards such payment.]


[ Section 49B. Order of utilisation of input tax credit.-

(1) Notwithstanding anything contained in this Chapter and subject to the provisions of clause (e) and clause (f) of sub section (5)

of section 49 , the Government may, on the recommendations of the Council, prescribe the order and manner of utilisation of the

input tax credit on account of integrated tax, central tax, State tax or Union territory tax, as the case may be, towards payment of

any such tax.]



Disclaimer: We have taken due care to the best of our knowledge while explaining the provisions surrounding the issue purely for informational/academic purpose. It should not be considered as professional advice or consultancy to be relied upon. While due care has been taken by Fab Gyan in preparing this article, certain mistakes and omissions may creep in. The Fab Gyan or its Author does not accept any liability for any loss or damage of any kind arising out of any inaccurate or incomplete information in this document nor for any actions taken in reliance thereon.



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