UNIT 5
INPUT TAX CREDIT & COMPUTATION OF GST
Input tax credit (ITC) is considered as a cornerstone of GST. Input tax credit means reducing the tax already paid on input (purchases) from tax to be paid on output (sales) input tax means tax changed by taxable person at the time of supply of goods / service in the previous tax regime, there was non – availability of credit at various point of supply of supply chine, which led to a cascading effect of tax and increase in the cost of good and service for example the VAT legislation allowed ITC of VAT on input and capital goods in transaction within the state, but not on input and capital goods coming in the start from outside the state, on which central sales tax was paid further the credit chain remained fragmented as the credit of central taxed could not be set off against a state levy and vice versa. This flow has been removed under GST and a seamless flow of credit throughout the value chain will help in reducing the cascading effect of tax.
Chapter V of the CGST Act (Sections 16 to 21) & Chapter V:
Input tax credit of the CGST rules (rule 36 – 45) prescribe the provisions relating to ITC. State GST laws also prescribe identical provisions in relation to ITC.
1.] Eligibility U/S 16(1):
Only registered person eligible to take ITC [Section 16(1)]:
Every registered person shall be entitled to take credit of input tax:
a) charged on any supply of goods or services or both to him.
b) which are used or intended to be used in the course or furtherance of his business and the said amount shall be credited to the electronic credit ledger of such person. In other words goods which are used for non-business purpose or not for furtherance of business cannot get input tax credit.
2.] Conditions to be satisfied for Taking ITC [Section 16(2)]:
A registered person shall be entities to the credit of any input tax in respect of any supply of goods or services or both to him unless:
a) Possession of Tax Paying Document:
He is in possession of a tax invoice or debit note issued by a supplier registered under this Act, or such other taxpaying documents as many be prescribed.
b) Receipt of Goods / Services:
He has received the goods or services or both.
Delivery of Goods at Instruction of Registered Person is Valid Receipt of Goods:
It shall be deemed that the registered person has received the goods where the goods are delivered by the supplier to a recipient or any other person on the direction of such registered person, whether acting as an agent or otherwise, before or during movement of goods, either by way of transfer of documents of title to goods or otherwise.
c) Tax Charged is Paid to Government:
Subject to the provision of Section 41, the tax charged is respect of such supply has been actually paid to the government, either in cash or through utilization of input tax credit admissible in respect of the said supply.
d) Furnishing of Returns:
He has furnished the return under Section 39.
e) Goods Received in Lots of Installments:
Where the goods against an invoice are received in lots or installments, the registered person shall be entitled to take credit upon receipt of the last lot or installment.
f) Payment If Not Made Within 180 Days From Date of Invoice:
Where a recipient fails to pay:
i) to the supplier of goods or services or both (Except supplies on which tax is payable on reverse charge basis).
Ii) the amount towards the value of supply along with tax payable thereon
Iii) within a period of 180 days from the date of issue of invoice by the supplier.
An amount equal to the input tax credit availed by the recipient shall be added to his output tax liability, along with interest thereon, in such manner as may be prescribed.
3.] Re – Credit if Payment is Made Subsequently:
However, the recipient shall be entitled to avail of the credit of input tax on payment made by him of the amount towards the value of supply of goods or services or both along with tax payable thereon.
4.] ITC Not Admissible if Depreciation Claimed on the Tax Component [Section 16(3)]:
Where the registered person has claimed depreciation on the component of the cost of capital goods and plant and machinery under the provisions of the Income Tax Act, 1961, the input tax credit on the said tax component shall not be allowed.
5.] Time Limit for Availing ITC [Section 16(4)]:
A registered person shall not be entitled to take input tax credit in respect of any invoice or debit not for supply of goods or services or both after:
a) the due of furnishing of the return under section 39 for the month of September following the end of financial year to which such invoice or invoice relating to such debit note pertains (i.e. 20th October of the next financial year) or
b) furnishing of the relevant annual return (i.e. 31st December of the next financial year)
Whichever is earlier.
(section – 17)
1.] Goods / Services Partly Used for Business & Partly for Other Use [Section 17(1)]:
Where the goods or services or both are used by the registered person:
a) partly for the purpose of any business; and
b) partly for other purposes,
The amount of credit shall be restricted to so much of the input tax as is attributable to the purposes of his business (i.e. pro – rata distribution of Input credit)
2.] ITC Restricted to Goods / Services Used for Taxable Supplies of the Same are Used for Effecting Taxable As Well As Exempt Supplies [Section 17(2)]:
Where the goods or services or both are used the registered person:
a) partly for effecting taxable supplies including zero – rated supplies under this Act or under the Integrated Goods & Services Tax Act, and
b) partly for effecting exempt supplies under the said act,
The amount of credit shall be restricted to so much of the input tax as is attributable to the said taxable supplies including zero – rated supplies.
3.] Inclusion in Exempt Supplies [Section 17(3)]:
The value of exempt supply U/S 17(2) shall be such as may be prescribed, and shall include:
a) supplies on which the recipient is liable to pay tax on reverse charge basis, and
b) transaction in securities,
c) sale of land and
d) subject to clause (b) of paragraph 5 of Schedule II, sale of building.
4.] Input Tax Credit in Case of Banking Company & Financial Institution: [Section 17(4)]
a) A banking company or a financial institution including a non-banking financial company, engaged in supplying services by way of accepting deposits, extending loans or advances shall have the option to:
i) either comply with the provisions of Section 17(2); or
Ii) avail of every month, an amount equal to 505 of the eligible input tax credit on inputs, capital goods and input services in that month and the rest shall lapse.
b) The option once exercised shall not be withdrawn during the remaining part of the financial year.
c) The restriction of 50% shall not apply to the tax paid on supplies made by one registered person to another registered person having the same Permanent Account Number.
5.] Input Tax Credit Not to be Availed in Respect of the Following Situations Section 17(5):
a) Motor vehicles and other conveyances.
However, credit can be availed if they are used:
i) for making the following taxable suppliers, namely:
1) further supply of such vehicles or conveyances; or
2) transportation or passengers; or
3) imparting training on driving, flying, navigating such vehicles or conveyances.
Ii) for transportation of goods.
b) Input tax credit will not be availed for supply of goods or services or both in case of
i) food and beverages, outdoor catering, beauty treatment, health services, cosmetic and plastic surgery.
However, credit will be eligible where an inward supply of goods or services or both of a particular category is used by a registered person for making an outward taxable supply of the same category of goods or services or both or as an element of a taxable composite or mixed supply
Ii) membership of a club, health and fitness Centre.
Iii) rent – a – cab, life insurance and health insurance.
However, Input tax credit will be eligible where:
1) the government notifies the services which are obligatory for an employer to provide to its employees under any law for the time being in force; or
2) such inward supply of goods or services or both of a particular category is used by a registered person for making an outward taxable supply of the same category of goods or services or both or as part of a taxable composite or mixed supply; and
Iv) travels benefits extended to employees on vacation such as leave or home travel concession.
c) Works contract services when supplied for construction of an immovable property.
However, input tax credit is allowed:
i) Where is supplied for construction of plant and machinery.
Ii) Where it is an input service for further supply of works contract service.
Here “Construction” includes re – construction, renovation, additions or alterations or repairs, to the extent of capitalization, to the said immovable property. And “Plant and Machinery” means apparatus, equipment, and machinery fixed to earth by foundation or structural support that are used for making outward supply of goods or services or both and includes such foundation and structural supports but excludes:
i) land, building or any other civil structures;
Ii) telecommunication towers; and
Iii) pipelines laid outside the factory premises.
d) Goods or services or both received by a taxable person for construction of an immovable property on his own account including when such goods or services or both are used in the course or furtherance of business.
However, credit is allowed if they are supplied for construction of plant and machinery.
e) Goods or services or both on which tax has been paid under Section 10. i.e. under Composition Scheme.
f) Goods or services or both received by a non-resident taxable person except on goods imported by him.
g) Goods or services or both used for personal consumption.
h) Goods lost, stolen, destroyed, written off or disposal of by way of gift or free sample.
i) Any tax paid in accordance with the provisions of Section 74, 129 and 130.
i.e. Evasion, confiscation etc.
(section 18)
1.] Availability of Input Tax Credit in Special Circumstances [Section 18(1)]
Subject to such conditions and restrictions as may be prescribed:
a) Input Tax Credit Available on Opening Stock of Inputs at the Time of Registration [Section 18 (1)(a)]:
A Person:
i) who has applied for registration under this Act within 30 days from the date on which he become liable to registration and
Ii) has been granted such registration shall be entitled to take credit of input tax in respect of:
1) inputs held in stock
2) inputs contained in semi – finished goods held in stock; and
3) inputs contained in finished goods held in stock.
From the day immediately preceding the date from which he becomes liable to pay tax under the provisions of this act.
b) Input Tax Credit Available on Opening Stock of Inputs at the Time of Voluntary Registration [Section 18(1)(b)]:
A person who takes registration under Section 25 (3) i.e. voluntary registration shall be entitled to take credit of input tax in respect of:
i) inputs held in stock
Ii) inputs contained in semi – finished goods held in stock; and
Iii) inputs contained in finished goods held in stock.
On the day immediately preceding the date of grant of registration.
c) Input Tax Credit Available on Opting Out of Composition Scheme [Section 18(1)(c)]:
Where any registered person ceases to pay tax under Section 10, i.e. composition scheme, he shall be entitled to take credit of input tax in respect of:
i) inputs held in stock
Ii) inputs contained in semi – finished goods held in stock; and
Iii) inputs contained in finished goods held in stock.
Iv) on capital goods
On the day immediately preceding the date from which he becomes liable to pay tax under Section 9.
The credit on capital goods shall be reduced by such percentage points as may be prescribed.
d) Input Tax Credit Available on Conversion of Exempt Supply Into Taxable Supply [Section 18(1)(d)]:
Where an exempt supply of goods or services or both by a registered person becomes a taxable supply, such person shall be entitled to take credit of input in respect of:
i) inputs held in stock
Ii) inputs contained in semi – finished goods held in stock; and
Iii) inputs contained in finished goods held in stock.
Iv) on capital goods exclusively used for such exempt supply
On the day immediately preceding the date from which such supply becomes taxable.
The credit on capital goods shall be reduced by such percentage points as may be prescribed.
2.] Time Limit to Take Input Tax Credit [Section 18(2)]:
A registered person shall not be entitled to take input tax credit under Section 18(1) in respect of any supply of goods or services or both to him after the expiry of one year from the date of issue of tax invoice relating to such supply.
3.] Transfer of Input Tax Credit on Account of Change in Constitution [Section 18(3)]:
Where there if a change in the constitution of a registered person on account of:
a) sale, merger, demerger, amalgamation, lease; or transfer of the business with the specific provisions for transfer of liabilities, the said registered person shall be allowed to transfer the input tax credit which remains unutilized in his electronic credit ledger to such.
b) sold, merged, demerged, amalgamated, leased or transferred business in such manner as may be prescribed.
4.] ITC Reversal on Switching to Composition Scheme or Goods Services Becoming Wholly Exempt [Section 18(4)]:
Where any registered person who has availed of input tax credit:
a) opts to pay tax under composition levy (section 10) or
b) where the goods or services or both supplied by him become wholly exempt, he shall pay an amount, by way of debit in the electronic credit ledger or electronic cash ledger, equivalent to the credit of input tax in respect of:
i) inputs held in stock
Ii) inputs contained in semi – finished goods held in stock; and
Iii) inputs contained in finished goods held in stock.
Iv) capital goods, reduced by such percentage points as may be prescribed, on the day immediately preceding the date of exercising of such option or, as the case may be, the date of such exemption.
After payment of such amount, the balance of input tax credit, if any, lying in his electronic credit ledger shall lapse.
5.] Amount to be Calculated in Prescribed Manner [Section 18(5)]:
The amount of credit under section 18(1) and the amount payable under section 18(4) shall be calculated in such manner as may be prescribed.
6.] Supply of Plant & Machinery After Use [Section 18(6)]:
In case of supply of capital goods or plant and machinery, on which input tax credit has been taken, the registered person shall pay higher of following amounts:
a) an amount equal to the input tax credit taken on the said capital goods or plant and machinery reduced by such percentage points as may be prescribed, or
b) the tax on the transaction value of such capital goods or plant and machinery determined U/s 15.
Where refractory bricks, moulds and dies, jigs and fixtures are supplied as scrap, the taxable person may pay on the transaction value of such goods determined under Section 15.
1.] Job Work [U/S Section 2(68)]:
“Job work” means any treatment or process undertaken by a person on goods belonging to another registered person and the expression “job worker” shall be constructed accordingly.
2.] Input Tax Credit is Allowed to Principal in Respect of Inputs Sent to Job Workers [Section 19(1)]:
The principal shall, subject to such conditions and restrictions as may be prescribed, be allowed input tax credit on inputs sent to a job worker for job work.
3.] Input Tax Credit is Allowed Even if Inputs is Sent Directly to Job Worker [Section 19(2)]:
Notwithstanding anything contained in Section 16(2)(b), the principal shall be entitled to take credit of input tax in input even if the inputs are directly sent to a job worker for a job work without being first brought to his place of business.
4.] Inputs Not Received Back by Principal Within One Year [Section 19(3)]:
Where the inputs sent for job work are:
a) not received back by the principal after completion of job-work or otherwise
b) or are not supplied from the place of business of the job worker in accordance with Section 143 (1)(a) / (b)
Within one year of being sent out, it shall be deemed that such inputs had been supplied by the principal to the job worker on the day when the said inputs were sent out.
5.] Direct Dispatch to Job Worker of Inputs:
Where the inputs are sent directly to a job worker, the period of one year shall be counted from the date of receipt of inputs by the job worker U/s 19(3).
6.] Input Tax Credit Allowed to Principal in Respect of Capital Goods Sent to Job Worker [Section 19(4)]:
The principal shall, subject to such conditions and restrictions as may be prescribed, be allowed input tax credit on capital goods sent to a job worker for job work.
7.] Input Tax Credit is Allowed Even if Capital Goods are Sent Directly to Job Worker [Section 19(5)]:
Notwithstanding anything contained in section 16(2)(b), the principal shall be entitled to take credit of input tax on capital goods even if the capital goods are directly sent to a job worker for job work without being first brought to his place of business.
8.] Capita Goods Not Received Back by Principal Within 3 Years [Section 19(6)]:
Where the capital goods sent for job work are not received back by the principal within a period of 3 year of being sent out, it shall be deemed that such capital goods had been supplied by the principal to the job worker on the day when the said capital goods were sent out.
9.] Direct Dispatch to Job Worker of Capital Goods:
Where the capital goods are sent directly to a job worker, the period of 3 years shall be counted from the date of receipt of capital goods by the job worker U/S 19(6)..
10.] Special Tools like Moulds & Dies, Jigs & Fixtures or Tools [Section 19(7)]:
Nothing contained in Section 19(3) or Section 19(6) shall apply to moulds and dies, jigs and fixtures, or tools sent out to a job worker for job work.
1.] The Input Service Distributor Shall Distribute:
a) the credit of central tax as central tax or Integrated tax, and
b) integrated tax as integrated tax or central tax, by way of issue of a document containing the amount of input tax credit being, distributed in such manner as may be prescribed U/S 20(1).
2.] The Input Service Distributor May Distribute the Credit Subject to the Following Conditions U/s 20(2):
a) the credit can be distributed to the recipients of credit against a document containing such details as may be prescribed
b) the amount of the credit distributed shall not exceed the amount of credit available for distribution
c) the credit of tax paid on input of services attributable to a recipient of credit shall be distributed only to that recipient
d) the credit of tax paid on input services attributable to more than one recipient of credit shall be distributed amongst such recipients to whom the input service is attributable and such distribution shall be pro rata on the basis of the turnover in a State or turnover in a Union territory of such recipient, during the relevant period, to the aggregate of the turnover of all such recipients to whom such input service is attributable and which are operational in the current year, during the said relevant period
e) the credit of tax paid on input services attributable to all recipients of credit shall be distributed amongst such recipients and such distribution shall be pro rata on the basis of the turnover in a state or turnover in a union territory of such recipient, during the relevant period, to the aggregate of the turnover of all recipients and which are operational in the current year, during the said relevant period.
3.] a) Thus the Term “Relevant Period” Shall Be:
i) if the recipients of credit have turnover in their States or Union territories in the financial year preceding the year during which credit is to be distributed, the said financial year; or
Ii) if some or all recipients of the credit do not have turnover in their States or Union territories in the financial year preceding the year during which the credit is to be distributed, the last quarter for which details of such turnover of all the recipients are available, previous to the month during which credit is to be distributed.
b) Thus the term ‘recipient of credit’ means the supplier of goods or services or both having the same Permanent Account Number as that Input Services Distributor.
c) Thus the term, in relation to ’Turnover‘in relation to any registered person engaged in the supply of taxable goods as well as goods not taxable under this Act, means the value of turnover, reduced by the amount of any duty or tax levied number entry 84 or List 1 of the seventh scheduled to the constitution and entry 51 and 54 of List II of the said schedule.
In excess (section 21)
1.] The credit in contraction of the provision contained in Section 20
2.] resulting in excess distribution of credit to one or more recipient of credit,
The excess credit so distributed shall be recovered from such recipient along with interest and the provisions of Section 73 or Section 74, as the case may be, shall, mutandis, apply for determination of amount to be recovered.
- Excess Credit of SGST can be adjusted against only IGST
- Excess Credit of UTGST can be adjusted against only IGST
- Excess Credit of UTGST can be adjusted against only IGST
- Excess Credit of IGST can be adjusted against CGST, SGST/UTGST in the manner as specified in the question. If not specified then students must adjust as per their wish)
PAYMENT OF GST
Section 49 of the Central Goods and Services Tax Act, along with rules published by the Central Board of Excise and Customs (CBEC), govern the new payment procedures. This provide, an overview of what they entail and looks at the following:.
1.] Electronic Ledgers.
2.] Manner of Utilization and Cross – Utilization of Input Tax Credit (ITC).
3.] Interest on Delayed Payments.
4.] Electronic Payment Forms.
5.] Unique Identification Number for Each Transaction.
In the GST portal, a taxable person can track his tax liabilities across three ledgers, each maintained in real – time.
1.] Electronic Liability Ledger (also known as electronic tax liability register):
Accounts for a taxpayer's gross tax liability – form GST PMT – 01 on the GST portal (Section 49(7) read along with Rule 85).
2.] Electronic Credit Ledger (also known as electronic input tax credit ledger):
Records the tax payments already made during the supply chain & every claim of ITC is recorded here – form GST PMT – 02.
3.] Electronic Cash Ledger:
All amounts paid by the taxpayer are reflected here – form GST PMT – 05.
1.] Maintenance of Electronic Cash ledger [Rule 87(1)]:
The electronic cash ledger under section 49(I) shall be maintained in FORM GST PMT – 05 for each person, liable to pay tax, interest, penalty, late fee or any other amount, on the common portal for crediting the amount deposited and debiting the payment there from towards tax, interest, penalty, fee or any other amount.
2.] Generation of Challan [Rule 87(2)]:
Any person, or a person on his behalf, shall generate 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.
3.] Modes of Deposited of Amount in Electronic Cash Ledger [Rule 87(3)]:
The deposit under rule 87(2) shall be made through any of the following modes, namely:
a) Internet Banking Authorised Banks.
b) Credit Card or Debit Through the Authorised Bank.
c) National Electronic Fund Transfer or Real Time Gross Settlement from Any Bank.
d) Over the Counter Payment Through Authorised Banks for Deposits up to 
10,000 Per challan per tax period, by cash, cheque or demand draft.
OTC Payment Restrictions Upto 
10,000 Not Applicable in Following Cases:
The restriction for deposit up to Z 10,000 per challan in case of an Over the Counter payment not apply to deposit to be made by:
a) Government Departments or any other deposit to be made by person as may be notified by the Commissioner in this behalf.
b) Proper officer or any other officer authorised to recover outstanding dues from any person, whether registered or not, including recovery made through attachment or sale of movable or immovable properties.
c) Proper officer or any other officer authorised for the amounts collected by way of cash, cheque or demand draft during any investigation or enforcement activity or any ad hoc deposit.
Validity of Challan – 15 days:
The challan in FORM GST PVT – 06 generated at the common portal shall be valid for a period of 15 days.
Commission to be Borne by Bayer [Explanation]:
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 person making such payment.
4.] Temporary Identification Number for Payment by Unregistered Persons [Rule 87(4)]:
Any payment required to be made by a person who is not registered under the Act, shall be made on the basis of a temporary identification number generated through the common portal.
5.] Mandate Form for NEFT or RTGS Payments [Rule 87(5)]:
Where the payment is made by way of National electronic Fund transfer or Real Time Gross Settlement mode from any bank, the mandate form shall be generated among with the challan on the common portal and the same shall be submitted to the bank from where the payment is to be made.
Validity of Mandate Form – 15 days:
The mandate form shall be valid for a period of 15 days from the date of generation of challan.
6.] Challan Identification Number [Rule 87(6)]:
On successful credit of the amount to the concerned government account maintained in the authorised bank, a Challan Identification Number (CIN) shall be generated by the collecting bank and the same shall be indicated in the challan.
7.] Credit in Electronic Cash Ledger on Receipt of CIN [Rule 87(7)]:
On receipt of the CIN from the collecting bank, the said amount shall be credited to the electronic cash ledger of the person on whose behalf the deposit has been and the common portal shall make available a receipt to this effect.
8.] Representation on Non Generation of CIN [Rule 87(8)]:
Where the bank account of the person concerned, or the person making the deposit on his behalf, is debited but no CIN is generated or generated but not communicated to the common portal, the said person may represent electronically in FORM GST PMT-07 through the common portal to the bank or electronic gateway through which the deposit was initiated.
9.] Credit of TDS/TCS [Rule 87(9)]:
Any amount deducted under section 51 or collected under section 52 and claimed in FORM GSTR – 02 by the registered taxable person from whom he said amount was deducted or, as the case may be, collected shall be credited to his electronic cash ledger in accordance with the provisions of Rule 87.
10.] Refund Amount to be Debited [Rule 87(I0)]:
Where a person has claimed refund of any amount form the electronic cash ledger, the said amount shall be debited to the electronic cash ledger.
11.] Credit on Account of Rejection of Refunds [Rule 87(11)]:
If the refund so claimed is rejected, either fully or partly, the amount debited under rule 87(l0), to the extent of rejection, shall be credited to the electronic cash ledger by the proper officer by an order made in FORM GST PCT – 03.
12.] Communication of Discrepancy to Jurisdictional Officer [Rule 87(12)]:
A registered person shall, upon noticing any discrepancy in his electronic cash ledger, communicate the same to the officer exercising jurisdiction in the matter, through the common portal in FORM GST PMT – 04.
1.] Maintenance of Electronic Credit Ledger by Person Eligible for ITC [Rule 86(1)]:
The electronic credit ledger shall be maintained in FORM GST PMT – 02 for each registered person eligible for input tax credit under the Act on the common portal and every claim of input tax credit under the Act shall be credited to the said ledger.
2.] Debits in Ledger [Rule 86(2)]:
The electronic credit ledger shall be debited to the extent discharge of any liability in accordance with the provision of Section 49.
3.] Refunds of ITC to be Debited in Ledger [Rule 86(3)]:
Where a registered person has claimed refund of any unutilized amount from the electronic credit ledger in accordance the provisions of Section 54, the amount to the extent of the claim shall be debited in the said ledger.
4.] Rejection of Refund of ITC Claim – Re – Credit in Ledger [Rule 86(4)]:
If the refund so filed is rejected, either fully or partly, the amount debited under rule 86(3), to the extent a rejection, shall be re – credited to the electronic credit ledger by the proper officer by an order made in FORM GST PMT – 03.
5.] No Direct Entry in Ledger [Rule 86(5)]:
Save as provided in the provisions of this chapter, no entry shall be made directly in the electronic credit ledger under any circumstance.
1.] Maintenance of Electronic Liability Register [Rule 85(1)]:
The electronic liability register specified under section 49(7) shall be maintained in FORM GST PMT-0i for each person liable to a tax, interest, penalty , late fee or any other amount on the common portal and all amounts payable by him shall be debited to the said register.
2.] Debits in Register [Rule 85(2)]:
The electronic liability register of the person shall be debited by:
a) the amount payable towards tax, interest, late fee or any other amount payable as per the return furnished by the said person.
b) the amount of tax, interest, penalty or any other amount payable as determined by a proper officer in pursuance of any proceedings under the Act or as ascertained by the said person.
c) the amount of tax and interest payable as a result of mismatch U/S 42 or Section 50 or.
d) any amount of interest that may accrue from time to time.
3.] Liability to be Paid by Debiting Electronic Cash / Credit Ledger & Corresponding Credit in Electronic Liability Register [Rule 85(3)]:
Subject to the provision of Section 49, payment of every liability by a registered person as per his return shall be made by debiting the electronic credit ledger maintained as per Rule 86 or the electronic cash ledger maintained as per Rule 87 and the electronic liability register shall be credited accordingly.
4.] Payments From Electronic Cash Ledger [85(4)]:
The amount deducted Under Section 51, or the amount collected Under Section 52, or the amount payable on reverse charge basis, or the amount payable Under Section 10, any amount payable towards interest, penalty, fee or any other amount under the act shall be paid by debiting the electronic cash ledger maintained as per Rule 87 and the electronic liability register shall be credited accordingly.
5.] Adjustments of Tax Reliefs by Appellate Authority in Register [Rule 85(5)]:
Any amount of demand debited in the electronic liability register shall stand reduced to the extent of relief given by the appellate authority or Appellate Tribunal or Court and the electronic tax liability register shall be credited accordingly.
6.] Adjustments of Reduction in Penalty in Register [Rule 85(b)]:
The amount of penalty imposed or liable to be imposed shall stand reduced partly or fully, as the case may be, if the taxable person makes the payment of tax, interest and penalty specified in the show cause may be, if the taxable person makes the payment of tax, interest and penalty specified in the show cause notice or demand order and the electronic liability register shall be credited accordingly.
7.] Discrepancy in Electronic Liability Register to be Communicated [Rule 85(7))]:
A registered person shall, upon noticing any discrepancy in his electronic liability ledger, communicate the same to the officer exercising jurisdiction in the matter, through the common portal in FORM GST PMT – 04.
When interest is payable ?
Interest is payable in following 3 circumstances:-
- Delay in payment of tax, in full or in part within the prescribed period
- Undue or excess claim of input tax credit under section 42(10)
- Undue or excess reduction in output tax liability under section 43(10)
section 42 (10) of CGST Act deals with contravention of provisions for matching of claims for input tax credit by a recipient and
section 43 (10) of CGST Act deals with contravention of provisions for matching of claims for reduction in output tax liability by a supplier
Rate of interest
The rate of interest shall be notified by the Government on the basis of recommendation of the Council. However, such rate to be notified shall not exceed-
- 18% in case of late payment of tax i.e. on failure to pay tax (or part of tax) to the Government’s account.
- 24% on undue or excess claim of ITC or on such undue or excess reduction in output tax liability.
Computation of period for calculation of interest
The period of interest will be from the date following the due date of payment to the actual date of payment of tax.
Other relevant points relating to interest
The term “tax” here means the tax payable under the Act or Rules made there under.
The payment of interest in case of belated payment of tax should be made voluntarily i.e. even without a demand.
The interest payable under this section shall be debited to the Electronic Liability Register.
The liability for interest can be settled by adjustment with balance in Electronic Cash Ledger but not with balance in electronic credit ledger.
