As per the Draft GST model law and the process documents issued by the Department of revenue. There is a reference of three ledgers that are electronic cash ledger, electronic credit ledger and tax liability ledger.
These 3 ledgers will be maintained for all the taxpayers and can be collectively known as Taxpayer ledgers, which are as follows:
The complete concept wr.to the above three ledgers are explained below.
Electronic cash ledger: All the payments deposited via challan under the minor head Tax, Interest, Penalty, Fees and others of the respective Major head like CGST, SGST and IGST shall be credit under the electronic cash ledger of the taxpayer. Any utilization of the available credit towards payment w.r.to liability arising out of the return or any other demand will be debited to such cash ledger.
Note: The cash ledger will display balance as on date under various major-minor head combination will CGST Tax, CGST Interest, CGST penalty etc. which will be 15 in count (3 Major heads* 5 Minor heads = 15 Major-Minor heads columns)
Electronic Input tax credit ledger: All the input taxes under various major heads i.e. CGST, SGST and IGST shall be credited to electronic ledger also known as Input tax credit or ITC ledger in the following situations: (All or any of them will form part of ITC ledger)
Debit in Input tax credit ledger
Any utilization of the available credit for the following purposes shall lead to debit entry to the ITC ledger:
Note: Input tax credit ledger shall display the balance under respective Major head like CGST, SGST and IGST.
Tax liability ledger shall also be electronically maintained which will display the amount of liability arising out the regular return of the taxpayer or any other liability arising out of demand notice, penalty etc. and shall also display the amount of liability paid by utilization of the available credit balance in Cash ledger or Input tax credit ledger.
Manner of utilization of credit balance available as per Cash ledger
As per the Section 35 all the payments deposited via challan under the minor head Tax, Interest, Penalty, Fees and others of the respective Major head like CGST, SGST and IGST shall be credit under the electronic cash ledger of the taxpayer which can be utilized only with respect to the same category of liability of tax, i.e. Liability of CGST Tax can only be paid from the Credit balance of CSGT Tax in cash ledger, which means no cross adjustments of the available credit balance w.r.to liability under other major heads shall be allowed. However, whether cross adjustments of minor heads under particular major head will be allowed or not is still not clear, i.e. whether CGST Tax liability can be paid from CGST Interest if balance available under CGST Tax is less. Apparently it seems that there won’t be any cross adjustments w.r.to minor heads under particular major head shall be allowed but the rules will clarify in this regards.
Manner of utilization of Input Tax Credit in ITC ledger
As per the Section 35 of the draft GST law there shall be a mechanism of utilization of input tax credit based on some pre-defined rules.
Please refer Section 2(40), Section 2(41), Section 16, Section 28, Section 29, Section 35 and other relevant provisions of the Draft GST law for more clarity, the article has been prepared based on the understanding of the Draft Model GST law released by the Department of Revenue on 14th June’2016 and Process document of Registration issued in October, 2015.