Payment of GST, Interest, Penalty etc, ITC Utilisation & Order

Simplified GST Series Section 49/49A/49B CGST ACT 2017

Article explains Section 49- Payment of Tax, Interest, Penalty and other Amounts, Section 49A-Utilisation of input tax credit subject to certain conditions and Section 49B- Order of utilisation of input tax credit.

Section 49- Payment of Tax, Interest, Penalty and other Amounts

(1) Every deposit made towards tax, interest, penalty, fee or any other amount by a person by internet banking or by using credit or debit cards or National Electronic Fund Transfer or Real Time Gross Settlement or by such other mode and subject to such conditions and restrictions as may be prescribed, shall be credited to the electronic cash ledger of such person to be maintained in such manner as may be prescribed.

(2) The input tax credit as self-assessed in the return of a registered person shall be credited to his electronic credit ledger, in accordance with section 41 or section 43; to be maintained in such manner as may be prescribed. 

√ Analysis- This section provides mode of payment of tax ,interest, penalty , fee or any other amount by taxable person.

√ We all know two kinds of ledgers- Electronic Credit ledger and electronic cash ledger.

√ Electronic cash ledger- Deposit of tax , interest ,penalty ,fee or any other amount by taxable person can be made by following modes-

• • Internet banking
  • Credit/Debit cards
  • NEFT
  • RTGS
  • OTC payment through authorised banks for deposit up to Rs 10000 per challan per challan per tax period by cash, cheque or demand draft.
  • Any other mode as may be prescribed.

√  Above deposit made will be credited to Electronic cash ledger of taxable person.

√  Any payment made towards respective Account Heads shall only be utilized for offset of liability of that head of account. For example, if IGST is paid through a Challan, then this cash balance against IGST in the cash ledger shall only be utilized for payment of IGST.

√  Electronic credit ledger- In my previous article we have discussed Section 41 –Provisional credit –Self-assessed Input Tax Credit as per return filed by a taxable person shall be credited to its Electronic Credit Ledger.

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

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

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

(a) integrated tax shall first be utilised towards payment of integrated tax and the amount remaining, if any, may be utilised towards the payment of central tax and State tax, or as the case may be, Union territory tax, in that order;

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

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

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

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

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

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

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

•  Analysis- Manner of utilisation of ITC and cross utilisation

 (1) Amount available in cash ledger may be used for payment of tax, interest , penalty .fees or any other provisions of Act.

(2) Amount available in Electronic Credit ledger may be utilised for payment of output tax payable under Act.

(3) The electronic credit ledger has following credit utilisation arrangement–

Now what I want to explain-After exhausting IGST credit for payment of IGST liability then remaining amount of IGST credit may be utilized for payment of CGST or SGST/UTHGST ‘in any order’, so as not to leave IGST liability unpaid before utilizing IGST Credit to pay CGST or SGTS/UTGST. The important restriction is that the CGST credit cannot be utilized for payment of SGST or UTGST and vice versa. One may note the fact that IGST credit is available seamlessly, subject to order of utilization as mentioned above.

Another important point-Input tax credit on account of State tax / union territory tax shall be utilized towards payment of integrated tax only where the balance of the input tax credit on account of central tax is not available for payment of integrated tax.

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

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

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

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

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

(c) Any other amount payable under this Act or the rules made there under including the demand determined under Section 73 or 74.

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

(10) A registered person may, on the common portal, transfer any amount of tax, interest, penalty, fee or any other amount available in the electronic cash ledger under this Act, to the electronic cash ledger for integrated tax, central tax, State tax, Union territory tax or cess, in such form and manner and subject to such conditions and restrictions as may be prescribed and such transfer shall be deemed to be a refund from the electronic cash ledger under this Act.

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

Analysis- 1. Section 49(6)- The  balance in the cash or credit ledger after payment of tax, interest, penalty, fee or any other amount may be refunded in accordance with the provisions of section 54 (dealing with refunds).

2. Section 49(8) -prescribes the chronological order in which the tax liability of a taxable person can be discharged:

• Self-assessed tax and other dues arising out of returns for previous tax periods must be discharged first
• Self-assessed tax and other dues relating to the return of the current tax period.
• Any other amount payable under the Act/Rules (liability arising out of demand notice or adjudicated proceedings etc.).

3. Section 49(9) -provides that the incidence of tax on goods/services is deemed to have been passed on to the recipient of such goods and /or services when the tax is paid unless the contrary is proved.

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

Notwithstanding anything contained in section 49, the input tax credit on account of central tax, State tax or Union territory tax shall be utilized towards payment of integrated tax, central tax, State tax or Union territory tax, as the case may be, only after the input tax credit available on account of integrated tax has first been utilized fully towards such payment.

Analysis- This section provides for compulsory full utilization of integrated tax first towards in order of payment i.e. IGST, CGST, SGST/UTGST

• Let us understand with simple example-

ITC Available-

IGST    Rs 200000

CGST   Rs 50000

SGST  Rs 50000

Tax Liability

IGST    Rs 100000

CGST   Rs 100000

SGST   Rs 100000

As per new provisions Section 49A-

Now available ITC balance- CGST -Rs 50000 and SGST liability to be paid by cash Rs 50000.

Here tax of SGST should be paid from cash ledger.ITC of CGST can’t be utilised for SGST or vice versa.

Section 49B- Order of utilisation of input tax credit 

Notwithstanding anything contained in this Chapter and subject to the provisions of clause (e) and clause (f) of sub-section (5) of section 49, the Government may, on the recommendations of the Council, prescribe the order and manner of utilisation of the input tax credit on account of integrated tax, central tax, State tax or Union territory tax, as the case may be, towards payment of any such tax

Analysis-This provision empowers Government on the recommendation of the Council to prescribe order and manner of utilization of the Input tax credit through rules / notification. It will facilitate changes in the mechanism of payment without amendment of law.

Provisions of section 49 stated above very important – Manner of utilisation of credit so I have tried to explain in very simplified manner.

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