CA Dr Arpit Haldia

Arpit HaldiaThis article intends to analyse the payment process as proposed through the Business Process Report under the GST. At the outset, it can be said that the proposed payment process has been designed keeping in mind the modern business requirements with a peep into the future.

The model as described has been designed in a manner so as to move the tax payers gradually towards the online mode for payment of taxes. But it’s all not so rosy about the payment process and suffers from shortcomings which are going to pinch the taxpayers in the future if incorporated as provided in the draft process. The article initially provides brief description of the payment process alongwith the salient features and concludes with providing few issues to ponder upon the proposed payment process in GST.

  • Salient Features of the Payment Process:

i) Government has allowed three modes for payment of taxes in GST but the goal which they have set for themselves as well for the taxpayers has been aptly made clear in the business process report as follows:

“It is desirable that under the GST regime, all taxpayers should gradually move to internet payment over an indicative time frame.”

The intention is very good but how far our education level and the Infrastructure in the country presently supports is another question which needs to be taken care of while deciding future steps in the given direction.

ii) Challan would be generated electronically for each mode of payment and no manually prepared challan would be accepted in any given case.

iii) Every Taxpayer who wants to avail the facility for e-payment of taxes would have to access the GSTN Common Portal for generating the challan.

iv) There would be two important Identification Number for the purpose of payment of taxes

a) CPIN: Common Portal Identification Number(CPIN): CPIN would be an Intermediary Number generated against the challan generated through GSTN Common Portal but yet to be paid through either of the three modes prescribed below. The validity of the CPIN would be seven days and if the mode of RTGS/IFSC Mode has been preferred by the taxpayer then CPIN would remain live with RBI for a period of 30 days. CPIN would be a 14 digit code. (yymm followed by 10-digit).

b) Challan Identification Number(CIN): Once successful payment has been made then the bank would convert the CPIN to CIN with three digits of bank code being added to the CPIN making it a 17 digit code. However, it is under consideration that whether date of payment should also be added to the CIN. This CIN would be an indication of the successful payment.

v) CGST, SGST, IGST and Additional Tax can be deposited through common challan however the minor heads for deposit of the taxes would be separate for all the four taxes. Following would be the five minor heads available for payment under four major heads i.e. CGST, SGST, IGST and Additional Tax

a) Major Head

b) Interest

c) Penalty

d) Fees

e) Others

iv) The challan would not be containing the details of Tax Period as Cash Ledger would be maintained on a real time basis by the GSTN Common Portal and any tax deposited would be added to the Cash Ledger and amount adjusted towards the liability would be through the Debit Entry in the cash ledger and debit entry number would be mentioned in the return.

v) It is proposed that challan would not have any jurisdictional code like the Commissionerate, Range etc. or Circle, Ward Etc. The challan would only contain the master details of the assessee. The process is similar to what is being followed under Income Tax whereby Jurisdiction of the assessee is never mentioned on the challan.

vi) Following modes of payments which are available in the present scenario would not be available and are proposed to be scrapped under the GST Regime:

a) Payment by book adjustment as allowed by Government of India to some departments / State governments or

b) Payment by debit to export scrips.

vii) There would be penalty mechanism for the erring banks for delayed payment of the taxes or for not reporting an error free data to the government and the taxpayers. This is already in place under the Direct Taxes and is recommended under the GST Regime as well.

  • Modes of Payments

Following are the three Modes of payments suggested in the Draft Payment Process in GST.

a) Payment by taxpayers through Internet Banking through authorized banks and through credit card/debit card;

b) Over the Counter payment (OTC) through authorized banks;

c) Payment through NEFT/RTGS from any bank (including other than authorized banks).

a) Payment by taxpayers through Internet Banking through authorized banks and through credit card/debit card;

Following are the methods through which the challan can be generated through GSTN Common Portal:

i. Registered tax payer or his authorized person by logging on to GSTN Common Portal through his User ID.

ii. Authorized representatives of tax payers by logging on to the GSTN Common Portal. The GSTN Portal would provide a User ID to the Authorized Representative whereby list of registered taxpayers represented by him will be displayed and he can select anyone of the client for the purpose of generation of Challan.

iii. Temporary Registration number could be granted by any one Tax authority on GSTN Common Portal which can be used by both the tax authorities for facilitating tax payments on behalf of an unregistered person.

iv. The challan can be generated without requirement of USER ID and Password, as per the directions of the tax authority using the GSTIN. Presently this system is being followed in Service Tax.

Once the e-payment mode has been selected by the tax payer he would have the option to select either payment though the e-banking mode or through the credit/debit card. Once the appropriate selection would be made, GSTN would redirect the taxpayer to the bank web portal or concerned payment gateway for further payment action.

b) Over the Counter payment (OTC) through authorized banks

i) This process would be allowed for payment of Taxes upto Rs 10000/- per challan.

ii) It would be mandatory to provide details of the name of the authorized bank, its location where the cheque is to be presented on GSTN before generation of Challan.

iii) No outstation cheques would be accepted. One of the reasons for not accepting the outstation cheques would be that clearing of the Outstation Cheques would take a long time in clearing and the government is trying to shorten the process and time taken for reaching the tax to the government account so that the credit of the taxes paid may be given immediately to the tax payer.

iv) The details of the Instrument would not be required to be entered mandatorily before the generation of Challan.

v) Taxpayer can either pay anyone of CGST, SGST, IGST and Additional Taxes or multiple taxes through one challan and even if more than one tax is paid through single challan, only one instrument i.e. one cheque or DD would be sufficient to pay the entire tax amount under different heads.

vi) In the given mode, even if the taxpayer would not carry the physical challan in duplicate copy i.e. one for bank and second for himself to get acknowledgement and carries only single copy and mentions the CPIN and the challan amount on the Bank Pay in Slip, the bank would be able to generate the second copy of the challan.

vii) No challan under this system could be used for payment of taxes, if the same has crossed the validity period of seven days. The system would automatically bar the use of such challan.

viii) Once the challan is paid through Cheque drawn on other bank or DD being made in favour of other bank then in such case after the realization of the said Instrument, the bank would send a SMS to the Taxpayer of the amount being received towards the taxes paid in addition to the payment status being updated on the GSTN Portal in taxpayers tax ledger account.

c) Payment through NEFT/RTGS from any bank (including other than authorized banks)

This is the method which has been sought to be introduced for the first time for payment of taxes under GST. This method would however be brought in gradually and is being presently tested in Karnataka.

It has been provided that

“This process will be beneficial for those taxpayers who do not have a bank account in any of the authorized banks or find such bank to be far away for OTC payment or want to make the payment directly from their account in their own bank only.”

i) Under the given method, even the banks which have not been authorized for the collection of the taxes would be able to remit the tax using the NEFT/RTGS Mode. It would be the similar procedure being provided by the banks to its customers under the Normal RTGS/NEFT Procedure.

ii) The challan under this method would be valid for a period of 7 days, however data would be live with RBI for a period upto 30 days. Any Taxpayer can pay the taxes though challan generated under this mode for a preferably upto 7 days and maximum upto 30 days from the date of generation of challan. However, it has been decided that any taxpayer using this mode beyond the validity period (seven days) of the CPIN more than two times would be barred by GSTN from availing this mode of payment.

iii) In case payment is received after the expiry of 30 days, RBI would refund the said amount to the remitter bank.

iv) It has been recommended that payments in cash would not be accepted for initiating NEFT / RTGS transaction.

v) RBI would itself be the first recipient for the payment being made by the taxpayer and while generating the tax challan, the name of the authorized bank would be auto-populated as RBI i.e Reserve Bank of India.

vi) The NEFT/RTGS Mandate form would also be generated by the GSTN Portal in the prescribed form.

vii) There would be two stages to keep a check on the payment process and to ensure that the payment is credited to correct GSTIN:

  • The amount received by RBI from the Remitter bank would be credited to the taxpayers account either on the basis of matching of the CPIN mentioned by the Remitter bank while remitting the funds to RBI with the CPIN Data provided by GSTN or in case the Remitter bank fails to mention the CPIN correctly then subsequently matching of UTR number.

The Taxpayer would be required to update the UTR number on his GSTN Portal. This UTR number would also be communicated by the Remitter bank to the RBI and RBI would match UTR Number given by remitter bank with the UTR Number updated by the Tax Payer. However UTR Matching would be secondary matching, if the CPIN matches then there would be no requirement of the UTR Matching.

  • However, if both the matching fails then the amount would be kept in separate account as Receipts awaiting Transfer.

♣ Challan Correction Mechanism:

i) Tax Being Deposited in the wrong GSTIN: The process report provides that as the tax has been remitted to the Government and its only the GSTIN which has been mentioned wrongly, therefore the government has no role to play in the same. The process provides that the mistake has been committed by the taxpayer himself or his authorized person or authorized representative; therefore there is no requirement to provide challan correction mechanism for the given error.

ii) Error in Major Head: The report provides that under this type of error, the bank would have collected the correct amount but credited the wrong head of tax account impacting the transfer of funds to the account of respective government for e.g. CGST being transferred to SGST etc. The banks have been given the power to rectify such mistake.

iii) Error in Total Amount: If the amount has been paid in excess by the taxpayer, then in such case either the refund claim can be made by taxpayer or the same can be carried forward to the next period for further setoff.

  • Issues requiring attention and concern for the taxpayers:

i) Challan Correction Mechanism:- No Method provided correction of error in GSTIN:

Para 123 of the report provides that

“Further once the payment confirmation is received by GSTN from the concerned bank then the amount will be credited to the ledger of the taxpayer whose GSTIN is mentioned in the electronic string that is relayed by the bank to GSTN (earlier the same GSTIN was communicated by GSTN to bank). Therefore taking into account both the above factors as well as the fact that Challan has been generated either by the taxpayer himself or through his authorized representative and the mistake being committed has no impact on the funds with tax administration, there is no need for providing an error correction mechanism for the same.

It further goes on to provide that

“The authorized representative, acting as an agent for the taxpayer should be responsible to the principal for any error committed while performing authorized acts and tax administration should have no role to play in this matter.”

This is an erroneous reason for not providing mechanism to correct challan deposited in wrong GSTIN. There can be a genuine error by the taxpayer or his authorized representative in depositing amount in wrong GSTIN and to provide that there is no need for providing an error correction mechanism as authorized representative is acting as an agent of the assessee and he would be responsible to the principal is erroneous to say the least.

Government cannot just shed themselves away from the responsibility of saving the interest of genuine taxpayer when a genuine error has been made by the taxpayer or his authorized representative. The genuine dealer should not be forced to take the long and tedious route of claiming the refund of the tax paid in wrong GSTIN through the application to be filed for claim of refund.

Government cannot claim helplessness in case of genuine fault of the assessee and allow the taxpayer to whose GSTIN amount has been wrongly credited to simply take away the hard earned money of the erring but genuine taxpayer. The genuine taxpayer is left in such a woeful condition wherein firstly he cannot do anything on his own and secondly the government does not want to do anything for the taxpayer.

It is surprising to see that if there is error in major head which impacts the transfer of funds to the account of the respective governments, therein there is a mechanism provided to the banks to withdraw funds from wrong head and credit to the correct head. Therefore, where funds of one government are wrongly credited to the another government, there is provision of transfer of funds from one government head to another government head, then one fails to understand that why such correction mechanism cannot be provided to reduce the sufferings of the genuine taxpayer.

If the government has brought in provisions to safeguard their own interest in case of error in crediting of taxes to the correct account head, then why on the same grounds hard earned money of the taxpayer should be allowed to be safeguarded in case of genuine mistake.

Mechanism could be brought in place in GST for challan correction for a limited period from the date of generation of Challan wherein Tax has been deposited incorrectly by mentioning wrong GSTIN.

ii) Provision to bar the tax payer from using RTGS/NEFT Facility on multiple faults:

The challan in RTGS/NEFT Mode would be valid for 7 days however it will remain live with RBI for a period of 30 days from the date of generation of Challan. Therefore a taxpayer can make the payment even after the expiry of seven days and upto Thirty days from the date of generation of challan through RTGS/NEFT Mode.

In the given case to prevent the taxpayers from making the payment under this mode beyond the period of seven days, firstly the lawmakers had provided their inability to ensure that challan cannot be used for payment through RTGS/NEFT Mode after the prescribed period of seven days as follows:

The Committee observed that in this mode of payment, it would not be possible to automatically ensure that a CPIN was not used beyond its validity period of 7 days.

Thereafter as always has been the case, lawmakers came up with an innovative draft provision shifting entire liability upon the taxpayer. The draft process provides to bar the taxpayer from using this mode as follows in Para No. 53

“Beside this, it was also decided that there should be a provision in the GST law whereby any taxpayer using this mode beyond the validity period (seven days) of the CPIN more than two times would be barred by GSTN from availing this mode of payment.”

This is not a prudent provision to blame the taxpayer for using challan beyond the validity period of seven days. It is to be understood that the taxpayers in this country are not tech savvy and they are rendering services to the government and when they are not tech savvy, whether putting such an onerous responsibility on them would be valid.

The system should automatically delete such challan from their database or debar the taxpayers from using such challan and if that’s not possible then check could have been made at the bank level when the taxpayer approaches the bank for the payment of taxes through NEFT/RTGS mode. Even after that debarring the tax payer entirely from using this facility for such default is completely irrational.

The lawmakers it seems are looking at the law from their point of view and not from the point of view of the taxpayer. It’s an onerous responsibility casted on the taxpayer to say the least and to bar the taxpayer from using the facility subsequently is like adding salt to the injury.

iii) Debarring of the taxpayer from using the OTC facility for payment of taxes if the cheque is bounced once:

Para 52 of the Business process report provides that

“It is also important to provide for a mechanism in GST Law to debar those tax payers whose cheques have once bounced from using this mode of payment. The most effective mechanism will be through GSTN which should debar such defaulters from using this mode.”

It’s an irrational suggestion to provide that taxpayer would not be allowed to use the OTC facility for payment of taxes if even once cheque of the taxpayer is bounced. It’s understood that the Dishonor of Cheque issued for payment of taxes creates additional burden on the banks and the administrative structure but barring of the taxpayer for just one fault is inappropriate.

There are many reason for cheque being returned other than shortage of funds like signature mismatch, date correction, validity period of cheque expired etc. and even if one considers that the cheque is returned due to shortage of funds then whether its proper to hang the taxpayer for just one default.

Continuous Defaulters should be banned but genuine taxpayers should not be made to suffer and the very reason for providing OTC facility would be lost if the taxpayers are not allowed to avail the tax payment mechanism for such defaults. If the government wants everyone to shift to electronic payment mechanism then they can be shifted in a well designed manner but not through the back door by barring them from using the other payment mechanisms on such mechanical, petty or singular defaults.

iv) Collection Charges to be levied on payment of taxes through debit/credit card and NEFT/RTGS Facility:

Para 17 of the Business Process report provides that

“The gateway provider should collect this amount separately over and above the challan amount. The challan amount should be fully credited to respective Government accounts maintained with the authorised bank (acquiring bank for CC/DC payments), while the gateway charges should be retained back by the gateway provider.”

Para 62 of the Business process report provides that

“The accepting bank should add its charges for doing NEFT / RTGS remittance and collect gross amount from the customer.”

It is strange to see that at one place the business process provides that slowly the taxpayers would be shifted to online mode of payment of taxes as per Para 9 of the business report which reads as follows:

“It is desirable that under the GST regime, all taxpayers should gradually move to internet payment over an indicative time frame.”

Wherein at one point the government is trying to move the taxpayers gradually from manual to online mode and on the other hand Gateway /Collection Charges are being levied and collected from the taxpayers for deposit of tax through debit/credit card and RTGS/NEFT Facility.

The Tax Payment transactions cannot be equated with private transactions wherein the taxpayer acts purely on business considerations. In the given circumstances, it’s the services which are being rendered by the taxpayer towards the collection of revenue on behalf of the Government against which he is receiving nothing from them and in turn he is being made to pay charges for the remittance of the taxes.

The charges should either be waived or should be borne by the government. The tax is being collected and remitted to government account on real time basis and it’s the government which is being benefitted from such real time payment and charging the taxpayer for making early payment would be improper to say the least.

v) Over the Counter payment (OTC) through authorized banks will be available for payments up to Rs. 10,000/- per challan only:

The draft law provides for a limit of Rs 10,000/- for over the counter payments. The limit is very low keeping in mind that the payment would be made by small town or village dealers who would not be having access to the Internet Banking.

Therefore, this limit needs to be increased to at least 25000/- initially so that the persons who do not have access to the internet banking may make use of it.

The Draft business report also further does not clarify the limit of Rs 10000/- per challan would be applicable for one day or for entire year or each major head or one month etc.

vi) Validity period of the Challan i.e. seven days too short:

It has been provided in Para No. 35 of the Report that

“After the challan is generated, it will be frozen and will not be allowed to be modified. The CPIN / challan so generated would be valid for a period of seven days within which payment is to be tendered.”

It has to be understood that the validity period of seven days within which the payment has to be tendered is very short. It should be at least 15-30 days so as to allow sufficient time period to the taxpayers for payment of the taxes through the challan.


Proposed Business process for payment of taxes marks an improvement over the prevalent process for payment of taxes with certain new processes being incorporated in the system. It seeks to lay down the path for the taxpayers to move to e-payment of taxes. However, there is need for some changes which if not brought in would be creating genuine difficulties for the taxpayers.

More Under Goods and Services Tax


  1. Hemant Balaji Harne says:

    Dear Sir,
    Thanks for explaining the detailed process of GST payment.
    Would like to ask, while changing over to GST, if the manufacturer is having huge CENVAT credit balance in his excise books of account, then how he can utilize it or will it become lapsed…
    Please explain.

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June 2021