Payment System or mechanism under GST Regime

Payment System or mechanism under GST Regime

General Rules for Payments

Regular taxpayers under GST must compute tax monthly, set off Input Tax Credit against Outward Tax Liability, and pay balance tax to the government. Ledgers to be maintained include Electronic Liability, Electronic Cash, and Electronic Credit Ledger. Payments can be made using ITC or cash. They compute their monthly tax liability, set off ITC against it, and pay any balance using either ITC or cash. This structured approach ensures compliance with GST regulations and efficient management of tax payments and credits.,

What is Electronic Cash Ledger ?

An Electronic Cash Ledger under the GST regime functions similar to an e-wallet specifically used for GST-related transactions. Here are the key aspects of an Electronic Cash Ledger. It serves as a digital repository where all GST payments made in cash or through a bank are recorded. After deducting Input Tax Credit (ITC) from the total GST liability, any remaining balance that needs to be paid to the government is done using the funds available in the Electronic Cash Ledger.

Under the GST regime in India, electronic ledgers (e-ledgers) play a crucial role in maintaining and managing tax payments and credits. These e-ledgers are accessible to all GST registrants on the GST portal. Maintaining accurate records in these ledgers ensures compliance with GST regulations. Taxpayers use these ledgers to manage their tax payments effectively, utilizing ITC where applicable and ensuring timely cash payments for other liabilities.

Kind of main ledgers in the GST system

Below three ledgers play a crucial role in managing and streamlining your GST payments and credits, ensuring transparency and accuracy in your tax transactions. Here’s a detailed explanation of the three main ledgers in the GST system. Here’s an overview of the three main e-ledgers:

• Electronic Cash Ledger: Acts like an electronic wallet for GST payments made in cash. It reflects the amounts deposited as GST payments to the government. Payments made towards tax liabilities that cannot be offset using Input Tax Credit (ITC), such as interest, penalties, and late fees, are debited from this ledger. Acts as an e-wallet for your GST payments. Reflects the cash payments made for GST through a bank or other means. Used to pay any balance tax liability after deducting Input Tax Credit (ITC). For example, if your total GST liability is Rs. 15,000 after considering ITC, you would use funds from your Electronic Cash Ledger to pay this amount.
• Electronic Credit Ledger: Stores the Input Tax Credit (ITC) accumulated from GST paid on inputs. It shows the balance of ITC available to the taxpayer. Taxpayers can use this balance to offset their GST liability on outward supplies (output tax). It cannot be used for payments like interest, penalties, or late fees. Displays the Input Tax Credit (ITC) you’ve claimed in your GST returns. ITC can only be utilized for tax payments, not for interest, penalties, or late fees. Utilized to offset GST liability in a specific order: IGST first, then CGST, and SGST last. For instance, if you have an ITC of Rs. 35,000 (IGST: Rs. 18,000, CGST: Rs. 7,000, SGST: Rs. 10,000), the IGST credit will be used to offset the IGST liability first, and any remaining liability will be paid in cash.
• Electronic Liability Ledger: Tracks all liabilities payable under GST, including tax, interest, penalties, etc. It details the amounts payable by the taxpayer. Payments made to settle these liabilities are debited from this ledger. It also shows any balance liability remaining after setoff. Keeps track of all amounts payable by you under GST, including tax, interest, penalty, etc. When you pay these amounts on the GST portal, the corresponding entries get debited from your Electronic Liability Ledger.

Specific Provisions Electronic ledgers in the GST system:

• Interest and Penalties: ITC cannot be used to pay interest and penalties. These amounts must be paid in cash.
• Late Fees: The liability for late fees cannot be adjusted against amounts deposited under penalties. Harsh can transfer any amount of tax, interest, penalty, fee, or any other amount available in the electronic cash ledger under the CGST Act, 2017, to the electronic cash ledger for integrated tax, central tax, State tax, or Union territory tax, or cess using FORM GST PMT-09.
• Clearing Tax Liability: If there is a sufficient balance in the electronic cash ledger to clear the tax liability, the payment through FORM GST PMT-06 is not mandatory.

Interest for Late Filing of GSTR-3B:

• No Interest on Late Filing if Tax is Deposited Timely: The Madras High Court ruled that interest under Section 50 of the GST Act is not payable if the amount equal to the tax liability is available in the electronic cash ledger within the due dates for filing GSTR-3B.
• Section 50(1) states that interest liability arises automatically on the delayed filing of returns. This liability applies regardless of whether the payment is made from the Electronic Credit Ledger or the Electronic Cash Ledger.
• The court clarified that if the taxpayer has sufficient balance in their electronic cash ledger equal to their tax liability within the due date, interest under Section 50 will not be charged. This ruling provides relief to taxpayers who ensure their electronic cash ledger has sufficient funds by the due date, even if the GSTR-3B filing is delayed.

Conclusion 

All payments under the GST regime must be made using either Input Tax Credit (ITC) available in the Electronic Credit Ledger. Or Cash balance available in the Electronic Cash Ledger. This ensures that taxpayers have clarity on how to utilize their electronic cash ledger and electronic credit ledger balances for various GST-related payments.

• Interest and penalties must be paid in cash, not through ITC.
• Late fees cannot be adjusted against penalty amounts.
• FORM GST PMT-09 can be used to transfer funds within the electronic cash ledger across different tax types.
• If the electronic cash ledger has enough balance to cover the tax liability, using FORM GST PMT-06 is not required.