Chapter 10 – Payment of Tax

Manner of Payment of Tax, Interest, etc. [Section 49]

1. Depositing Amount to Electronic Cash Ledger
a. When paying tax, interest, penalty, fees, or other amounts, they're credited to the
Electronic Cash Ledger.
b. Payment methods include internet banking, cards, NeFT, RTGS, or prescribed modes.
c. The Electronic Cash Ledger is a summary maintained on the GST Portal.
2. Crediting Input Tax Credit to Electronic Credit Ledger
a. Input Tax Credit (ITC) is credited to the electronic credit ledger.
b. ITC is the credit for tax paid on inputs used in a business.
c. Ledger maintenance is as prescribed.
3. Utilization of Electronic Cash Ledger
a. Amounts in the electronic cash ledger are used for various GST Act payments.
b. Usage subject to conditions, restrictions, and time limits.
4. Transfer of CGST to IGST/SGST/UTT in Electronic Cash Ledger
a. Registered persons can transfer amounts to various heads.
b. Transfer done on the common portal.
c. Transfer conditions apply, treated as a refund.
5. Transferred Amount Deemed Deposit: Transferred amount is treated as a deposit.
6. Utilization of Electronic Credit Ledger for Output Tax
a. Electronic credit ledger used for paying output tax.
b. Output tax is tax collected on sales or supplies.
7. Manner of Utilization of Electronic Credit Ledger
a. Utilization depends on the type of credit.
b. IGST credit pays IGST, then CGST/SGST/UTGST.
c. CGST credit pays CGST, then IGST.
d. SGST/UTGST credit pays SGST/UTGST, then IGST.
e. CGST can't pay SGST, and vice versa.
8. Maximum Proportion of Output Tax to be Paid from E-Credit Ledger
a. Government can specify max proportion for payment using Electronic Credit Ledger.
b. Applies to registered persons or groups.
c. Conditions set for using Electronic Credit Ledger to pay tax liability.
9. Refund of Balance in Electronic Ledgers: Remaining balances refunded as per Section 54
provisions.
10. Electronic Liability Register
a. Records liabilities under GST Act.
b. Maintained digitally as prescribed.
11. Order of Discharge of Liabilities: Taxpayer pays dues in a specific order:
a. Previous tax period dues.
b. Current tax period dues.
c. Any other dues under GST Act or rules, including Section 73 or Section 74 demands.
12. Incidence of Tax - Deemed Passed
a. Paying GST implies passing tax burden to recipient unless proved otherwise.
b. Date of credit in government account is considered date of deposit in Electronic Cash
Ledger.

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Utilisation of ITC and Order of Utilisation of ITC
1. ITC Utilization Conditions [Sec. 49A]: ITC on central, state, or union territory tax used only after
integrated tax ITC is fully utilized.
2. Order of ITC Use [Sec. 49B]: Government can specify the sequence for using ITC types based
on Council recommendations.
3. ITC Utilization Order [Rule 88A]
a. Rule 88A outlines ITC use order.
b. Integrated tax ITC first pays integrated tax; surplus can pay central, state, or union
territory tax.
c. Central, state, or union territory tax ITC used after integrated tax ITC is fully used.
4. Restrictions on Electronic Credit Ledger [Rule 86B]
a. Rule 86B restricts using electronic credit ledger for output tax when taxable supply
exceeds ₹50 lakh/month.
b. Limited to 99% of tax liability from available ledger credit.

Electronic Cash Ledger

1. Maintenance of Electronic Cash Ledger [Rule 87(1)]:
a. The Electronic Cash Ledger is a digital ledger for GST-related payments.
b. Maintained in FORM GST PMT-05 on the government's common portal.
c. Records deposits and tracks their usage for various GST payments.
d. Credited for deposits and debited for payments.
2. Generation of challan [Rule 87(2)]:
a. Challans (FORM GST PMT-06) are created for GST payments.
b. Validity period of 15 days from generation date.
c. Challans specify payment type and amount.
3. Modes of deposit of amount in Electronic Cash Ledger [Rule 87(3)]:
a. Payment Methods:
i. When depositing funds into the Electronic Cash Ledger, various payment
methods are available: Internet Banking, Unified Payment Interface (UPI),
Immediate Payment Services (IMPS), Credit/Debit Card, NEFT/RTGS
ii. Over the Counter (OTC) Payment: Deposit cash, cheque, or demand draft at
authorized banks for amounts up to ₹10,000 per challan per tax period.
b. OTC Payment Exemptions: The ₹10,000 OTC payment restriction doesn't apply in
specific cases, including:
i. Deposits made by Government Departments or persons notified by the
Commissioner.
ii. Recovery of outstanding dues by the proper officer or any other authorized
officer, including recovery through attachment or sale of properties.
iii. Amounts collected during investigations, enforcement activities, or ad hoc
deposits by the proper officer or any other authorized officer.
c. Additional Provision for OIDAR Services: If you provide online information and
database access or retrieval services from outside India to a non-taxable online
recipient, you can use international money transfer via the Society for Worldwide Inter-
bank Financial Telecommunication (SWIFT) payment network. The specific date for this
provision will be notified by the Board.
d. Commission Responsibility: When making a payment specified in the challan, any
commission payable for the payment will be borne by the person making the payment.

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4. Payment by unregistered supplier using TIN [Rule 87(4)]: Unregistered individuals can use
Temporary Identification Numbers (TIN) for payments.
5. Mandate form for NeFT or RTGS payments [Rule 87(5)]:
a. Required for NEFT, RTGS, and IMPS payments.
b. Mandate form is generated along with the challan.
c. Valid for 15 days.
6. Challan Identification Number [CIN] [Rule 87(6)]:
a. Generated after successful deposit.
b. Unique identifier provided by the collecting bank.
c. Crucial for tracking and identifying payment transactions.
7. Credit in electronic cash ledger on receipt of CIN [Rule 87(7)]:
a. Amount credited upon receiving CIN.
b. Functions as a digital account to track deposits.
8. Representation to bank on non-generation of CIN despite payment [Rule 87(8)]:
a. Complaint process for non-generated or uncommunicated CIN.
b. Submission through FORM GST PMT-07.
c. Additional provision [Inserted by Notification No. 26/1022 dated 26-12-2022]:
i. If the bank fails to communicate the details of the CIN to the common portal,
the Electronic Cash Ledger (E-Cash Ledger) may be updated based on the
electronic scroll (e-Scroll) provided by the Reserve Bank of India (RBI).
ii. The e-Scroll should match the details mentioned in the challan generated on
the common portal in FORM GST PMT-06.
iii. This provision ensures that the E-Cash Ledger is updated accurately, even if
there are issues with the CIN communication.
iv. What is e-scroll?
1. An e-scroll refers to an electronic scroll, which is a digital document or
record that contains details of financial transactions.
2. In the context of the Electronic Cash Ledger, the e-scroll is provided by
the Reserve Bank of India (RBI) and it contains information about the
payments made by individuals or businesses.
3. The e-scroll is used as a reference to ensure that the Electronic Cash
Ledger is updated accurately when there are issues with the
communication of the Challan Identification Number (CIN) from the
bank to the common portal.
4. It helps in reconciling the payment details and ensuring the correct
updating of the Electronic Cash Ledger.
9. Credit of TDS/TCS [Rule 87(9)]:
a. TDS and TCS amounts credited to the electronic cash ledger.
b. Usable for various GST-related payments.
10. Refund amount to be debited [Rule 87(10)]:
a. Refund request debits specific amount from the ledger.
b. Ensures accurate ledger balance after processing.
11. Credit on account of rejection of refunds [Rule 87(11)]:
a. Refund rejection credits the debited amount back to the ledger.
b. Facilitated through FORM GST PMT-03.
12. Communication of discrepancy to Jurisdictional Officer [Rule 87(12)]: Registered persons
report ledger discrepancies via GST PMT-04.
13. Transfer of amount from one account head to another [Rule 87(13)]:

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 a. Transfer of funds between ledger categories.
b. Utilizes FORM GST PMT-09.
c. Enhances financial management within the ledger.
14. Transfer of cash balance to distinct person [Rule 87(14)]:
a. Transfer of funds to another person's electronic cash ledger.
b. Specific to central tax or integrated tax.
c. Conditions apply, including the absence of unpaid liabilities.
15. Explanations:
a. Refund rejection upon appeal rejection.
b. Refund deemed rejected if an appeal isn't filed or an undertaking not to file is given to
the proper officer.

Question 1

Pranesh has deposited a sum of ₹5,000 under the head of ‘Fee’ column of Cess and ₹4,000 was lying
unutilized under the head of ‘Penalty’ column of IGST. Both the deposits were made wrongly instead
of depositing under the head of Fee column under SGST.

In the light of the provisions of section 49(10) & 49(11) of the CGST Act, 2017, briefly explain the
relevant provisions as how can Pranesh rectify these errors?

Solution

A registered person is allowed to make intra-head or inter-head transfer of amount, as available in

electronic cash ledger, using specified form (FORM GST PMT-09). He can transfer any amount of tax,
interest, penalty, fee or others, under one (major or minor) head to another (major or minor) head, as
available in the electronic cash ledger.

Therefore, in the given case, amount of ₹5,000 available under minor head ‘fee’ of major head ‘cess’
and ₹4,000 available under minor head ‘penalty’ of major head ‘IGST’ can be transferred to minor head
‘fee’ of major head ‘SGST’ using specified form.

Electronic Credit Ledger

1. Maintenance of Electronic Credit Ledger (Rule 86(1)):
a. It's an account for eligible persons under GST.
b. Recorded in FORM GST PMT-02 on the common portal.
c. Tracks and manages input tax credits (ITC).
2. Debits in Ledger (Rule 86(2)):
a. Debits reduce available ITC.
b. Happens when ITC is used to pay tax liability.
3. Refunds Deducted (Rule 86(3)):
a. Refund claims deduct from the ledger.
b. Follows Section 54 of the GST Act.
4. Rejected Refund Re-credited (Rule 86(4)):
a. Rejection of refund claim leads to re-credit.
b. Done via FORM GST PMT-03.
5. Re-credit for Erroneous Payment (Rule 86(4A)):
a. Wrongly paid tax re-credited if refundable.
b. Via FORM GST PMT-03.
6. Repayment of Erroneous Refund (Rule 86(4B)):

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 a. Refund received by mistake can be repaid.
b. Debited from electronic cash ledger.
7. No Direct Entries (Rule 86(5)): Entries are automated based on rules.
8. Discrepancy Reporting (Rule 86(6)): Report ledger discrepancies via FORM GST PMT-04.
9. Deemed Refund Rejection (Explanation): Appeal rejection or undertaking means refund denial.

Clarifications Regarding Utilization of the Amounts Available in the

Electronic Credit Ledger and the Electronic Cash Ledger for Payment of
Tax and Other Liabilities
• Issue 1: Can the electronic credit ledger be used for tax payments under GST?
Clarification:
o Electronic credit ledger funds can be used for output tax payments under CGST/IGST
Act.
o Payment follows ITC utilization order (Sec. 49B and Rule 88A).
o Output tax includes self-assessed or law-induced payments but not reverse charge
taxes.
• Issue 2: Can the electronic credit ledger pay liabilities other than tax?
Clarification:
o Electronic credit ledger is solely for output tax payments under CGST/IGST Act.
o It cannot cover interest, penalties, fees, or cash refunds for errors.
• Issue 3: Can the electronic cash ledger pay GST liabilities?
Clarification:
o Electronic cash ledger can cover tax, interest, penalties, fees, or any GST-related
payment per Sec. 49(3).

Electronic Liability Register

1. Maintenance:
a. It tracks amounts a person owes under GST.
b. Recorded in FORM GST PMT-01 on the common portal.
c. Each liable person has one.
d. Different from electronic cash and credit ledgers.
2. Debits:
a. Debited for tax, interest, penalty, etc.
b. Debited upon return, officer's order, or accrued interest.
c. Keeps track of what's owed.
3. Payment Process:
a. Uses electronic cash/credit ledger.
b. Records liabilities in the register.
c. Payment by ledger debiting and register crediting.
4. Payments from Cash Ledger:
a. For TDS, TCS, reverse charge, composition scheme, interest, penalty, fees.
b. Debit electronic cash ledger, credit liability register.
5. Tax Relief Adjustments:
a. Demands recorded, reduced by relief from appeal.
b. Recorded in register, adjusted upon appeal outcome.
6. Penalty Reduction Adjustments:

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 a. Imposed penalty recorded, reduced by payment.
b. Adjusted in the register to reflect the reduction.
7. Discrepancy Reporting: Discrepancies reported to the tax officer through FORM GST PMT-04
on the common portal.

Identification Number for Each Transaction [Rule 88]

1. Assignment of UIN:
a. Unique Identification Number (UIN) given to every debit/credit transaction.
b. UIN generated on the common GST portal.
2. Recording in Liability Register:
a. When paying a liability, the UIN linked to that payment is noted in the electronic
liability register.
b. This register tracks all tax obligations.
3. UIN for Credit Entries:
a. UIN also assigned to credit entries in the liability register for various reasons.
b. Such entries could be adjustments, refunds, or any activity increasing the credit
balance.
4. Purpose: UINs ensure proper documentation and traceability of financial activities concerning
tax and liabilities.

CPIN, CIN, BRN and E-FPB

1. CPIN (Common Portal Identification Number):
a. 14-digit unique number for generated challans.
b. Issued by the common portal.
c. Valid for 15 days for payment.
2. CIN (Challan Identification Number):
a. 17-digit number generated by authorized banks or RBI.
b. Comprises 14-digit CPIN + 3-digit Bank Code.
c. Confirms successful payment receipt and credits to government account.
3. BRN (Bank Reference Number):
a. Transaction number assigned by the bank for challan payments.
b. Helps track the specific transaction within the banking system.
4. E-FPB (Electronic Focal Point Branch):
a. Designated branches of authorized banks for GST collections.
b. Each bank has one E-FPB for nationwide transactions.
c. E-FPB branches manage accounts for GST payments.
d. RBI acts as E-FPB for NEFT/RTGS transactions.

Interest on Delayed Payment of Tax

1. Interest Rate: If tax payment is delayed, a person must pay interest at an 18% annual rate on
the unpaid tax amount.
2. Interest Calculation: Interest starts accruing the day after the tax due date and continues until
the tax is paid.
3. Interest on Net Tax Payable: Interest applies if a taxpayer files their return after the due date.
It's calculated on the tax payable for the period after considering input tax credits. Specific
calculation rules apply.

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 4. Interest on Wrong ITC: If someone wrongly claims or uses input tax credit, they may owe
interest at a government-determined rate, currently 18%.
5. Key Points:
a. "Tax" means tax payable under the Act or rules.
b. Interest payment is voluntary, even without a demand.
c. Interest is debited to the Electronic Liability Register.
d. It can't be paid from the electronic credit ledger but can be settled using the electronic
cash ledger.

Manner of Calculating Interest on Delayed Payment of Tax [Rule 88B]

1. Late Return - Cash Portion: If the return is filed late, interest (18% per annum) is calculated only
on the tax payable via cash (debiting electronic cash ledger), not on the part covered by Input
Tax Credit (ITC).
2. On-Time Return - Full Amount: If the return is filed on time but tax payment is delayed, interest
(18% per annum) applies to the entire tax amount.
3. Wrong ITC Calculation: If ITC is wrongly claimed and used, interest (18% per annum) applies
from the date of wrongful use until reversal or tax payment.
4. Wrong ITC Utilization Date: Wrongly claimed ITC is considered used when the electronic credit
ledger balance falls below the wrongly claimed amount. The utilization date is either the due
date of the return filing or the actual filing date (whichever is earlier) for return-related use, or
the date of debit for other cases.

Question 2

PQR Ltd., have filed their GSTR-3B return for the month of August, 2022 within the due date i.e., 20-
09-2022. It was noticed in October, 2022 that tax dues for the month of August, 2022 have been short
paid by ₹10,000. The shortfall of ₹10,000 was paid through cash ledger and credit ledger amounting to
₹7,500 and ₹2,500 respectively while filing GSTR-3B of October, 2022 which was filed on 20-11-2022.

1. Examine and compute the interest payable if any under the CGST Act, 2017.
2. What would be your answer if, GSTR-3B for the month of August 2022 had been filed belatedly
on 20-11-2022 as above?

Note: Ignore the effect of the leap year. Electronic cash ledger and credit ledger carried sufficient
balance for the above shortfall.

Solution

In case of delayed payment of tax, interest is payable @ 18% per annum from the date following the
due date of payment to the actual date of payment of tax. However, interest is payable only on the
short-paid tax which is paid through electronic cash ledger if return under section 39 is furnished after
the due date.

1. In the given case, PQR Ltd. has furnished the return for August 2022 by the due date. Hence,
interest is payable on the entire amount of short payment of ₹10,000, as under:

Computation of Amount of Interest Payable

Particulars
Due Date of Payment of Tax 20-09-2022
Actual Payment of Tax 20-11-2022
Period of delay in days 61

CA NISHANT KUMAR 7
 GST Payable 10,000
Rate of Interest p.a. 18%
Interest payable (₹10,000 × 18% × 61/365) (Rounded off) 301
2. If PQR Ltd. has furnished the return for August 2022 after the due date, interest is payable only
on the short payment which is paid through electronic cash ledger, i.e., ₹7,500, as under:

Computation of Amount of Interest Payable

Particulars
Due Date of Payment of Tax 20-09-2022
Actual Payment of Tax 20-11-2022
Period of delay in days 61
GST Payable 7,500
Rate of Interest p.a. 18%
Interest payable (₹7,500 × 18% × 61/365) (Rounded off) 226

Transfer of Input Tax Credit [Section 53]

1. Utilization of CGST for IGST Dues: If a taxpayer uses CGST availed as input tax credit to pay IGST
dues, the government reduces the collected central tax by that amount.
2. Transfer Explanation: Simply put, when CGST pays IGST, the equivalent amount shifts from the
central tax account to the integrated tax account, ensuring proper crediting.
3. Uniform Treatment: UTGST and SGST receive the same treatment, and this provision mirrors
Section 18 of the IGST Act, 2017.

Transfer of Certain Amounts [Section 53A]

1. Electronic Cash Ledger Transfer: When an amount moves from the CGST Act's electronic cash
ledger to the SGST Act or UTGST Act's ledger, specific actions are required.
2. Allocation to State/Union Territory: An equal amount from the transferred sum will be assigned
to the State tax or Union territory tax account, ensuring correct tax distribution.
3. Government Guidelines: The government will establish guidelines and timeframes for this
transfer to maintain clarity and consistency.

Transfer of Certain Amounts [Section 17A of the IGST Act]

1. Electronic Cash Ledger Transfer: When funds move from IGST Act's electronic cash ledger to
SGST Act or UTGST Act's ledger, additional steps are involved.
2. Allocation to State/Union Territory: An equivalent sum from the transferred amount will be
assigned to the State tax or Union territory tax account, ensuring precise tax distribution.
3. Government Guidelines: The government will establish guidelines and timelines for this
transfer, ensuring a well-defined process.

Transfer of Input Tax Credit [Section 18 of the IGST Act]

1. Using IGST for CGST: When taxpayers employ integrated tax (IGST) credits from the IGST Act to
cover central tax (CGST) liabilities, the government takes specific measures.
a. IGST amount decreases by the credit used, adjusting tax appropriately.
b. The Central Government transfers the reduced amount from the IGST account to the
central tax account per government-set guidelines.
2. Using IGST for UTGST: When taxpayers utilize IGST credits to settle Union territory tax (UTGST)
liabilities, the government follows distinct procedures.

CA NISHANT KUMAR 8
 a. IGST amount decreases by the credit used, allocating the right tax amount to the Union
territory.
b. The Central Government transfers the reduced amount from the IGST account to the
Union territory tax account, adhering to government-defined timelines.
3. Using IGST for SGST: When taxpayers use IGST credits to fulfill State tax (SGST) obligations,
certain government actions come into play.
a. IGST amount reduces by the credit used, ensuring correct tax sharing between the
Central Government and the respective State Government.
b. The Central Government transfers the allocated amount to the State Government's tax
account, following government-prescribed guidelines.
c. "Appropriate State" refers to the State or Union territory where the taxpayer is
registered or liable to be registered under the Central Goods and Services Tax Act.

Tax Wrongfully Collected and Paid to Central Government or State

Government [Section 19 of IGST Act, 2017]
1. IGST Paid Instead of CGST/SGST - Refund:
a. If a registered person mistakenly pays integrated tax (IGST) on a transaction initially
considered as inter-State but later deemed intra-State, they can claim a refund.
b. The refund amount follows prescribed procedures and conditions specified by
authorities.
2. CGST/SGST Paid Instead of IGST - No Interest on IGST:
a. If a registered person pays central tax (CGST) and State tax/Union territory tax
(SGST/UTGST) on a transaction they thought was intra-State but turns out to be inter-
State, they won't face interest charges on the IGST amount owed.
b. This means no additional interest penalties for paying CGST/SGST instead of IGST due
to an honest mistake.

Question 3

Zeon Ltd., a GST registered supplier located in Ranchi, Jharkhand, is engaged in the manufacturing of
washing machines & mixer grinders. It provides you the details of various activities undertaken during
the month of September, 2022 as follows:

S. Particulars Amount
No. (₹)
(i) Outward supplies made during the month: 29,00,000
a. Within Jharkhand ₹24,00,000
b. Outside Jharkhand ₹5,00,000
(ii) Purchase of raw materials from registered dealers within Jharkhand which 7,00,000
includes materials worth ₹2,00,000 purchased from Mr. Krishna, a registered
person who is paying tax under composition scheme.
(iii) Bus purchased from a registered dealer in Tatanagar, Jharkhand. Bus used to 12,00,000
ferry its 25 workers to and from factory.
Assume the rates of GST applicable on various supplies as follows:

Nature of Supply CGST SGST IGST

Composition Supplies 0.5% 0.5% -
Bus 14% 14% 28%
Raw Material 6% 6% 12%
Washing Machines & Mixer Grinders 9% 9% 18%

CA NISHANT KUMAR 9
Opening balances of input tax credit as on 01/09/2022 were as follows:

CGST (₹) SGST (₹) IGST (₹)

20,000 5,000 95,000
Note:

1. All the figures mentioned above are exclusive of taxes.

2. Both inward & outward supplies within the State of Jharkhand are to be considered intra-State
supplies and outside the State of Jharkhand are inter-State supplies.
3. Subject to information given above, all the other conditions necessary for availing ITC have
been fulfilled.

Calculate the amount of net minimum GST payable in cash by Zeon Ltd. for the month of September,
2022.

Brief and suitable notes should form part of your answer.

Solution

Computation of Net Minimum GST Payable in Cash by Zeon Ltd. for September, 2022
Particulars Value (₹) CGST (₹) SGST (₹) IGST (₹)
Intra-State outward supplies 24,00,000 2,16,000 2,16,000
Inter-State outward supplies 5,00,000 90,000
Total Outward Tax Liability 2,16,000 2,16,000 90,000
Less: Input Tax Credit (Note 1)
Less: IGST Credit utilised (Note 4) - 5,000 90,000
2,16,000 2,11,000 -
Less: CGST Credit utilised 2,16,000 -
- 2,11,000 -
Less: SGST Credit utilised 2,03,000 -
Net GST Payable in Cash - 8,000 -
ITC to be carried forward to next month 2,000
Notes:

1. Computation of Input Tax Credit Available

Particulars Value (₹) CGST (₹) SGST (₹) IGST (₹)

Opening Balance 20,000 5,000 95,000
Purchase of raw materials from dealers 5,00,000 30,000 30,000
within Jharkhand (₹7,00,000 – ₹2,00,000)
(Note 2)
Bus purchased from dealer in Jharkhand used 12,00,000 1,68,000 1,68,000
to ferry 25 workers to and from factory (Note
3)
Total ITC Available 2,18,000 2,03,000 95,000
2. ITC on purchases of goods worth ₹2,00,000 on which tax has been paid under composition
scheme is blocked. ITC on remaining purchases worth ₹5,00,000 is available, being supply of
goods used/intended to be used in the course/furtherance of business. The rate of GST for Raw
Materials given in the question is 12% (6% CGST and 6% SGST).
3. ITC on motor vehicles for transportation of persons with seating capacity > 13 persons
(including the driver) used for any purpose is allowed. The rate of GST for Bus given in the
question is 28% (14% CGST and 14% SGST).

CA NISHANT KUMAR 10
 4. Once the IGST credit is utilised towards IGST liability, the balance can be utilised for either CGST
liability or SGST liability in any order. After utilising the IGST credit against the IGST liability,
balance IGST credit = ₹95,000 – ₹90,000 = ₹5,000. Since the SGST credit is less than the CGST
credit, and we have to keep the net GST payable in cash minimum, the remaining IGST credit
is utilised against SGST liability. After exhausting IGST credit, CGST and SGST credit is to be
utilized. CGST credit is to be utilized for payment of CGST and SGST credit is to be utilized for
the payment of SGST. ITC of CGST cannot be utilized for payment of SGST and vice versa.

Question 4

Ajay Limited, a registered dealer in Patna (Bihar), is engaged in various types of supplies. The company
provided the following details for the month of January 2022:

S.
Particulars Amount (₹)
No.
(i) Outward supply of goods made during the month to various non-related As given in
persons: particulars
Market Transaction column
Particulars
Value Value
a. In the State of Bihar (Intra-State) 3,00,000 4,00,000
b. To other States (Inter-State) 2,00,000 1,00,000
(ii) Services provided to the State Government of Karnataka for conducting a 5,00,000
computer training programme for its employees. Total expenditure incurred
for the said programme was ₹90,000, of which ₹63,000 was borne by the
State Govt. (Inter-State transaction)
(iii) Stock transfer without consideration to its branch at Gaya (Bihar). Branch Nil
has separate GSTN for convenience of accounting and billing.
Value under section 15 - ₹20,000 (Intra -State)
(iv) Intra - State inward supply of various services for use in the course or 6,50,000
furtherance of business (30 invoices)
Additional information:

1. All the amounts given above are exclusive of taxes.

2. During the course of arranging and filing documents, the accountant of Ajay Limited observed
that an invoice for ₹30,000 (excluding tax) dated 02.12.2021 was omitted to be recorded in the
books of accounts and no payment was made against the same till the end of January 2022.
This invoice was issued by Mr. Mukesh of Patna, from whom Ajay Limited had taken cars on
rental basis. Invoice included cost of fuel also. (Intra-State transaction).
3. Rate of GST applicable on various supplies are as follows:
Nature of Supply CGST SGST IGST
Car rental service 2.5% 2.5% 5%
All other inward and outward supplies 9% 9% 18%
4. No opening balance of input tax credit exists at the beginning of the month.
5. Out of the 30 invoices of inward supply received, 6 invoices with taxable value amounting to
₹1,50,000 were e-invoices in which Invoice Reference Number (IRN) was not mentioned.
However, all the invoices were duly reflected in GSTR 2B for the month of January 2022, since
the suppliers had filed their GSTR-1.
6. Subject to the information given above, conditions necessary for claiming ITC were complied
with.

CA NISHANT KUMAR 11
You are required to calculate the amount of net GST liability payable in cash by Ajay Limited for the
month of January 2022. Brief notes for treatment given for each item should form part of your answer.

Solution

Computation of Net GST Liability Payable by Ajay Limited for January, 2022
Particulars Value (₹) CGST (₹) SGST (₹) IGST (₹)
Intra-State Supplies:
Intra-State outward supplies (Note 1) 4,00,000 36,000 36,000
Intra-State stock transfer to Gaya Branch with separate 20,000 1,800 1,800
registration (Note 2)
Inter-State Supplies:
Inter-State outward supplies (Note 1) 1,00,000 18,000
Inter-State services provided to State Government of 5,00,000 90,000
Karnataka for conducting a computer training
programme (Note 3)
Total Outward Tax Liability 37,800 37,800 1,08,000
Less: Input Tax Credit (Note 4)
Less: IGST Credit utilised - - -
37,800 37,800 1,08,000
Less: CGST Credit utilised against CGST and then 37,800 7,200
against IGST (Note 7)
- 37,800 1,00,800
Less: SGST Credit utilised against SGST and then 37,800 7,200
against IGST (Note 7)
Net GST Payable in Cash - - 93,600
Notes:

1. Value of supply is the transaction value of the goods.

2. Supply of goods between distinct persons in course or furtherance of business qualifies as
supply even if made without consideration.
3. Not exempt since the State Government has borne less than 75% of total expenditure of the
training programme.
4. Computation of Input Tax Credit Available

Value CGST SGST IGST

Particulars
(₹) (₹) (₹) (₹)
Opening Balance - - -
Intra-State inward supply of services (₹6,50,000 – 5,00,000 45,000 45,000
₹1,50,000) (Note 5)
Cars taken on rental basis from Mr. Mukesh (Note - - -
6)
Total ITC Available 45,000 45,000 -
5. ITC cannot be claimed on the e-invoices without IRN since an e-invoice without IRN is not
treated as valid document for claiming ITC. (Note: You'll study about it in the next chapter)
6. Tax on renting of motor car services wherein cost of fuel is included in consideration provided
by a non-body corporate to a body corporate and invoice is issued charging CGST/SGST @ 2.5%
is payable under reverse charge.
Time of supply of such services is 1st February being earlier of date of payment, or date
immediately following 60 days since issue of invoice by the supplier. Since the time of supply

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 of renting of motor car services in the given case does not fall in January, tax liability on the
same does not arise in said month.
Further, ITC on renting of motor car services received is blocked since the recipient - Ajay Ltd.
is not in the same line of business. It has been most logically assumed that Ajay Ltd. is not
engaged renting of cars business.
7. CGST credit should be utilized for payment of CGST and IGST in that order. Similarly, SGST credit
should be utilized for payment of SGST and IGST in that order. ITC of CGST cannot be utilized
for payment of SGST and vice versa.

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