• Jun 10, 24
• bhushanbjain
• 0 comment

Payment Modes and Ledgers under GST Act, 2017:

• Electronic Cash Ledger (ECL) under GST Act, 2017:
  • Created on the GST portal for each taxpayer.
  • Used for paying tax, interest, penalty, fees, and other amounts payable under the Act.
  • Deposits are made electronically (online banking, credit/debit cards, NEFT, RTGS).
  • Deposited amounts are credited to the ECL immediately.
• Electronic Credit Ledger (ECL) under GST Act, 2017:
  • Reflects input tax credit (ITC) claimed by a registered person.
  • ITC is credited to the ECL after verification by tax authorities.
  • ITC balance can be used for paying output tax.

Payment Process under GST Act, 2017:

1. File GST Returns under GST Act, 2017: File GSTR-1 (Sales), GSTR-3B (Monthly/Quarterly Summary), and other applicable returns by the due date.
2. Calculate Tax Liability under GST Act, 2017: Based on filed returns and applicable rates, calculate tax payable (including CGST, SGST, and IGST).
3. Make Payment under GST Act, 2017:
   1. Within due date under GST Act, 2017: Use the ECL to make timely payments. Late payment attracts interest and penalty.
   1. Outside due date under GST Act, 2017: File late return and pay tax, interest, and penalty with applicable forms (GSTR-4, GSTR-5, GSTR-9).
   1. Interest calculation under GST Act, 2017: Interest accrues on unpaid tax @ 18% per annum from the due date of payment.
   1. Penalty calculation under GST Act, 2017:
      1. For delay in filing returns: Late filing fee of Rs. 100 per day (maximum Rs. 5,000 per return).
      1. For short payment of tax: Penalty @ 10% of the tax amount (subject to a minimum of Rs. 1,000).
      1. For non-payment of tax or fraudulent evasion: Penalty @ 100% of the tax amount (subject to a minimum of Rs. 10,000).

Important Points under GST Act, 2017:

• Advance Tax Payment under GST Act, 2017: Optionally, taxpayers can make advance tax payments (challan type 0043 for CGST and SGST, 0044 for IGST) to be adjusted against future tax liabilities.
• Refunds under GST Act, 2017: If ITC exceeds output tax liability, claim refund through GSTR-9 (annual return).
• Correction of Errors under GST Act, 2017: Use Form GST PMT-03 to rectify errors in payments or returns.
• Compliance under GST Act, 2017: Adhere to payment deadlines and GST rules to avoid penalties and interest charges.

EXAMPLE

Scenario under GST Act, 2017:

• M/s Soumya Ltd., a registered taxpayer under GST, is liable to pay tax of ₹100,000 for the month of January 2024.
• The due date for filing the GSTR-3B return and paying the tax is 20th February 2024.
• M/s Soumya Ltd. files the GSTR-3B return on 21st February 2024, one day late.
• They also realize they made an error in the return, under-reporting the tax liability by ₹20,000.

Calculation of Tax, Interest, Penalty and Other Amounts under GST Act, 2017:

1. Tax Liability under GST Act, 2017: ₹100,000 (original) + ₹20,000 (under-reported) = ₹120,000
2. Interest under GST Act, 2017:
   1. Late filing of GSTR-3B attracts a late filing fee of ₹100 per day, subject to a maximum of ₹5,000.
   1. In this case, the late filing fee is ₹100 per day for 1 day = ₹100.
   1. Interest on late payment of tax is calculated at 18% per annum from the due date (20th February) to the date of payment.
   1. Assuming the payment is made on 23rd February, the interest for 3 days is ₹120,000 * 18% * 3/365 = ₹102.74.
3. Penalty under GST Act, 2017:
   1. For late payment of tax, a penalty of 10% of the tax amount due is levied, subject to a minimum of ₹1,000.
   1. In this case, the penalty is ₹120,000 * 10% = ₹12,000 (minimum of ₹1,000 does not apply here).
   1. However, there is a late payment penalty reduction scheme available, which can reduce the penalty by 50% if the payment is made within a specified timeframe. Let’s assume M/s ABC Ltd. avails this scheme and the reduced penalty is ₹6,000.
4. Other Amounts under GST Act, 2017:
   1. There might be additional fees or charges depending on the mode of payment used (e.g., online payment gateway charges).

Total Payment under GST Act, 2017:

• Tax: ₹120,000
• Interest: ₹102.74
• Penalty: ₹6,000
• Other Charges: (Assuming ₹50)

Total Payment = ₹126,152.74

FAQ QUESTIONS

Payment of Tax under GST Act, 2017:

• How are taxes paid under GST Act, 2017?
  • Taxes are paid electronically through the GST portal using challan forms.
  • Separate challans are used for CGST, SGST & IGST.
• What are the due dates for filing returns and paying taxes under GST Act, 2017?
  • Due dates vary based on taxpayer category (e.g., monthly filers, quarterly filers). Check the GST portal for specific dates.
• Can I pay tax in installments under GST Act, 2017?
  • Yes, in certain cases, you can request permission from the Commissioner for payment in installments. Interest will apply.

Interest under GST Act, 2017:

What is the interest rate for late tax payment under GST Act, 2017?

• 18% per annum for regular cases.
  • 24% per annum for undue ITC claims or tax reduction.
• When does interest start accruing under GST Act, 2017?
  • Interest accrues from the due date of tax payment till actual payment.

Penalty:

• What are the different types of penalties under GST Act, 2017?
  • Late fee for late filing of returns.
  • Penalty for non-payment of tax, short payment, or incorrect information.
  • Penalty for specific offenses like issuing fake invoices.
• What are the rates of penalties under GST Act, 2017?
  • Penalties vary depending on the offense, ranging from Rs.10,000 to 100% of tax amount.

Other Amounts under GST Act, 2017:

• How to claim Input Tax Credit (ITC) under GST Act, 2017?
  • ITC is claimed through GSTR-3B return by uploading invoices received from suppliers.
• How to get a refund of excess tax payment under GST Act, 2017?
  • File a refund application through the GST portal. Interest is payable on delayed refunds.

CASE LAWS

The GST Act, 2017, along with its rules and regulations, lays down the framework for payment of tax, interest, penalty, and other amounts. However, various interpretations and disputes arise in specific situations. Here are some notable case laws relevant to your query:

Payment of Tax under GST Act, 2017:

• M/s. Kavya Consultants (P) Ltd. vs. The Union of India & Ors. (2022): This case clarified that ITC cannot be used to offset tax liability arising from past periods before GST registration.

Interest under GST Act, 2017:

• M/s. Mcleod Russel India Ltd. Vs. CCE, Salem-I (2022): This case dealt with the levy of interest on delayed payment of tax due to classification dispute. The court held that interest can be levied only if the classification adopted by the taxpayer is demonstrably incorrect.
• M/s. Jindal Stainless Ltd. Vs. CCE, Coimbatore (2020): This case clarified that interest cannot be charged on the amount of penalty levied.

Penalty under GST Act, 2017:

• M/s. Hero MotoCorp Ltd. Vs. Union of India & Ors. (2022): This case highlighted the principle of proportionality while imposing penalties. The court held that the penalty should be reasonable and commensurate with the nature of the offense.
• M/s. Dharni Fabrics Ltd. Vs. CCE, Tirchy (2020): This case emphasized the requirement of a proper show-cause notice before imposing penalties.

Other Amounts under GST Act, 2017:

• M/s. KPR Mills Ltd. Vs. Union of India & Ors. (2022): This case dealt with the levy of late fee for delayed filing of returns. The court held that the fee cannot be levied if the delay is due to technical glitches in the GST portal.

Disclaimer under GST Act, 2017: This is not an exhaustive list, and the specific applicability of these cases to your situation may vary. It is highly recommended to consult with a tax professional for tailored advice considering the facts and circumstances of your case.

UTILISATION OF INPUT TAX CREDIT SUBJECT TO CERTAIN CONDITIONS

Eligibility under GST Act, 2017:

• Section 16 of the Act lays down the eligibility criteria for availing ITC.
• You can claim ITC only on the tax paid on inward supplies of goods or services used or intended to be used for business purposes.
• You must possess a tax invoice/debit note or other specified document as proof of purchase.
• The tax has to be actually paid by the supplier.
• You must have filed your GST return.
• There are specific timeframes for claiming ITC based on the receipt of goods/services and payment to the supplier.

Utilization under GST Act, 2017:

• Section 41 under GST Act, 2017 deals with the utilization of ITC.
• ITC can be used to offset your output tax liability (GST payable on outward supplies).
• There’s a specific order of utilization:
  • First, utilize IGST credit towards payment of IGST, CGST, SGST, or UTGST.
  • Then, utilize CGST credit towards payment of CGST or IGST.
  • Finally, utilize SGST/UTGST credit towards payment of SGST/UTGST or IGST.
• You cannot use ITC for personal expenses or payment of late fees/penalties.

Conditions and Restrictions under GST Act, 2017:

• ITC on certain goods/services may be restricted or blocked.
• You might need to reverse ITC in specific situations, like non-payment to the supplier or change in business use of goods/services.
• The burden of proof for claiming ITC lies on the taxpayer (Section 155).

EXAMPLE

Scenario under GST Act, 2017:

• You are a registered business owner in Tamil Nadu manufacturing furniture.
• You purchase raw materials (wood, glue, etc.) worth ₹10,000 with 18% GST (₹1,800).
• You receive a proper tax invoice for the purchase.
• You use these materials exclusively for your furniture production.
• You sell finished furniture worth ₹20,000 with 18% GST (₹3,600).

Conditions under GST Act, 2017:

1. Eligible Goods and Services: The purchased materials must be used for making taxable supplies of goods or services.
2. Proper Invoice: You must possess a valid tax invoice with all required details.
3. Time Limit: You can claim ITC within 36 months from the invoice date.

ITC Calculation under GST Act, 2017:

• Input tax paid on purchases = ₹1,800
• Output tax liability on sales = ₹3,600

ITC Utilization under GST Act, 2017:

1. Full Utilization: Since your output tax liability is higher than the input tax paid, you can utilize the entire ₹1,800 to reduce your GST payable.
2. Partial Utilization: If your output tax liability was lower (e.g., ₹1,500), you could only utilize ₹1,500 of the ITC. The remaining ₹300 would be carried forward for utilization in future tax periods.

Important points to remember under GST Act, 2017:

• You can only claim ITC on eligible goods and services.
• You must have a valid tax invoice to support your claim.
• ITC utilization follows a specific order (IGST, CGST, SGST).
• There are restrictions and conditions for claiming ITC on certain goods and services (e.g., food, travel, insurance).

FAQ QUESTIONS

• Who is eligible to claim ITC under GST Act, 2017?
  • Only registered taxpayers under GST can claim ITC.
  • ITC can be claimed on goods and services used for business purposes.
• What are the basic conditions to claim ITC under GST Act, 2017?
  • The purchased goods or services must be documented with a valid tax invoice or debit note.
  • The GST paid on the purchase must be reflected in your supplier’s GSTR-2B.
  • You must have paid the GST to your supplier within 180 days of the invoice date.
  • You must file your GST returns regularly (GSTR-3B).
• What are the restrictions on ITC utilization under GST Act, 2017?
  • You cannot claim ITC on goods or services listed in the negative list (Section 17(5) of CGST Act).
  • From January 1, 2021, taxpayers with monthly taxable supplies exceeding Rs. 50 lakh cannot use ITC to discharge more than 99% of their tax liability (except for specific exemptions).

Specific Conditions under GST Act, 2017:

• ITC on goods used for both taxable and exempt supplies under GST Act, 2017:
  • You can claim proportionate ITC based on the ratio of taxable and exempt supplies.
  • You need to maintain separate records for taxable and exempt purchases.
• ITC on imports under GST Act, 2017:
  • You can claim ITC only if the import duty and IGST are paid and documented properly.
  • Specific conditions apply for imports under schemes like SEZs or Duty Drawback.
• ITC on capital goods under GST Act, 2017:
  • ITC on capital goods can be claimed in equal installments over their useful life.
  • You need to maintain proper records of depreciation and ITC claimed.
• Reversal of ITC under GST Act, 2017:
  • You need to reverse ITC if the goods or services are returned, used for personal consumption, or become ineligible for ITC.

CASE LAWS

Eligibility for ITC under GST Act, 2017:

• ALD Automotive Pvt. Ltd. v. CTO [2018]: ITC is not a right but a concession, and eligibility is determined by the Act.
• TVS Motor Co. v. State of Tamil Nadu [2018]: ITC is available only on inputs used or intended to be used for business purposes.
• State of Karnataka v. M.K. Agro Tech. (P) Ltd. [2017]: ITC cannot be claimed on exempted supplies or those specifically excluded by the Act.

Conditions for ITC claim under GST Act, 2017:

• Section 16 of CGST Act: Defines the conditions for claiming ITC, including possession of tax invoice, payment of tax, and filing of returns.
• ITC on promotional expenses: Several cases have allowed ITC on promotional expenses like gifts or free samples if they are directly linked to business activities. (e.g., Dairy Food Pvt. Ltd. v. The Commissioner – GST [2022])
• ITC on blocked credits: Section 17(5) lists situations where ITC is blocked, like goods lost, stolen, or gifted.

Order of ITC Utilization under GST Act, 2017:

• Section 49 of CGST Act: ITC must be used in a specific order: first Integrated Tax (IGST), then Central Tax (CGST), and lastly State Tax (SGST).

Additional points under GST Act, 2017:

• Rule 42/43 of CGST Rules: Deals with reversal of ITC in case of non-payment of tax or misuse of credit.
• Circulars and Notifications: Issued by authorities to clarify specific aspects of ITC utilisation.

ORDER OF UTILISATION OF INPUT TAX CREDIT

1. Integrated Tax (IGST) under GST Act, 2017:

• All available IGST credit must be fully utilized first.
• This means you can use it to pay off your IGST liability on any type of transaction (intra-state or interstate).
• You cannot use CGST or SGST credit to pay off your IGST liability until you have exhausted your IGST credit.

2. Central Tax (CGST) and State/Union Territory Tax (SGST/UTGST) under GST Act, 2017:

• Once your IGST credit is fully utilized, you can then use your CGST credit and SGST/UTGST credit in any order.
• This means you can use them to pay off your CGST, SGST, or UTGST liability, depending on your needs.

Here are some additional points to remember:

• This order of utilization is mandated by Rule 88A of the CGST Rules, 2017.
• The rule was amended in 2019 to address concerns about fund settlement between the central and state governments.
• The GST portal was updated to reflect the new order of utilization in July 2019.
• If you have any doubts or need further clarification, it’s always best to consult with a tax professional.

EXAMPLE

Order of Utilization of Input Tax Credit (ITC) under GST Act 2017 in Tamil Nadu

The order of utilizing ITC under the GST Act 2017 is the same across all states in India, including Tamil Nadu. Here’s an explanation with an example:

Rule 88A of the CGST Rules 2017 prescribes the order of utilizing ITC:

1. Integrated Tax (IGST) Credit:
   1. Utilize your entire IGST credit first towards payment of your IGST liability.
   1. Any remaining IGST credit cannot be used for CGST or SGST until the IGST credit is fully exhausted.
2. Central Tax (CGST) and State Tax (SGST)/Union Territory Tax (UTGST) Credit:
   1. After fully utilizing IGST credit, you can use CGST credit towards payment of CGST liability and SGST credit towards payment of SGST liability (or UTGST credit towards UTGST liability, if applicable).
   1. You can utilize CGST and SGST (or UTGST) credit in any order, as long as you use them for their respective tax liabilities.

Example:

Let’s say your business in Tamil Nadu has the following GST liabilities and ITC available:

Tax Type	Liability	ITC Available
IGST	₹500	₹2000
CGST	₹1000	₹150
SGST	₹1000	₹150

Drive Spreadsheet Export to Sheets

Following the order of utilization:

1. First, utilize the entire IGST credit (₹2000) towards your IGST liability (₹500). This leaves you with ₹1500 of IGST credit remaining.
2. Since IGST credit is not fully exhausted, you cannot use CGST or SGST credit yet.
3. Therefore, you have ₹1500 of IGST credit remaining and ₹1000 of both CGST and SGST liability each.

Note: This is a simplified example. In real-life scenarios, you might have multiple transactions with different tax rates, and the order of utilization might become more complex.

Additional Points under GST Act, 2017:

• You can only utilize ITC for the same type of tax (CGST for CGST liability, SGST for SGST liability, etc.).
• You cannot carry forward unutilized ITC to the next financial year. However, you can claim a refund for the unutilized ITC subject to certain conditions.
• It’s recommended to consult a tax advisor for specific guidance on your business’s ITC utilization.

FAQ QUESTIONS

1. What is the current order of ITC utilization under GST Act, 2017?

As of February 2024, the order of ITC utilization is:

• First: Fully utilize IGST credit against any tax liability (Central Tax, State Tax, Union Territory Tax).
• Then: Utilize Central Tax credit against Central Tax liability.
• Finally: Utilize State Tax/Union Territory Tax credit against respective State/Union Territory Tax liability.

2. When did this order change under GST Act, 2017?

This order was implemented on July 1st, 2019. Before that, the order was different, requiring utilization of Central Tax credit before State Tax/Union Territory Tax credit.

3. Are there any restrictions on ITC utilization under GST Act, 2017?

Yes, there are a few restrictions:

• Minimum 1% cash payment: Taxpayers with monthly taxable supplies exceeding Rs. 50 lakh cannot use ITC to discharge more than 99% of their tax liability. They must pay at least 1% in cash.
• Specific exemptions: Certain taxpayers like those paying high income tax are exempted from the 1% cash payment rule.
• Time limit for availing ITC: You can generally claim ITC within 365 days from the invoice date, subject to certain conditions.

CASE LAWS

The order of utilization of input tax credit (ITC) under the GST Act, 2017 is primarily governed by Rule 88A of the CGST Rules, 2017, with clarifications provided by Circular No. 98/17/2019 and judicial pronouncements on specific aspects. Here’s a breakdown:

Rule 88A:

1. Integrated Tax (IGST): ITC on IGST must be first utilized towards payment of IGST itself. Any remaining IGST credit can then be used for Central Tax (CGST) or State Tax (SGST/UTGST), in any order.
2. CGST, SGST/UTGST: ITC on these taxes can only be utilized after exhausting all available IGST credit. They can be used towards payment of the respective tax (CGST for CGST credit, SGST/UTGST for their respective credit) or any other outstanding tax liability (IGST, CGST, SGST/UTGST).

Circular 98/17/2019:

This circular emphasizes the mandatory nature of the order prescribed in Rule 88A. You cannot utilize CGST/SGST/UTGST credit before exhausting IGST credit.

Case Laws:

While there are no specific case laws directly addressing the order of ITC utilization, some relevant judgments touch upon related aspects:

• lHigh Court of Chennai uphed the time limit for claiming ITC under Section 16(4) of the CGST Act. This indirectly reinforces the importance of utilizing ITC within the prescribed timeframe.
• Other judgments on ITC eligibility or reversal do not directly address the order of utilization but might have implications depending on the specific circumstances.

Important Notes under GST Act, 2017:

• The order of utilization applies to each tax period (month) separately. You cannot carry forward unused credit from one period to adjust against a different tax liability in another period.
• The GST portal automatically calculates and reflects the utilization of ITC based on the prescribed order. However, it’s crucial to understand the rule and its implications for accurate compliance.

ORDER OF UTILISATION OF INPUT TAX CREDIT

1. Priority of tax types under GST Act, 2017:

• IGST credit: Utilize all available IGST credit first towards payment of IGST liability.
• Remaining credit: After exhausting IGST credit, utilize the remaining credit on account of CGST, SGST, or UTGST in any order.

2. Within each tax type under GST Act, 2017:

• You can utilize the credit available within each tax type (CGST, SGST, or UTGST) in any proportion.

Important points to remember under GST Act, 2017:

• This order of utilization is mandatory and cannot be changed.
• There was a change in the utilization method in 2019. The information provided above reflects the current method.
• If you have any doubts or specific scenarios, it’s recommended to consult a tax professional for personalized guidance.

EXAMPLE

The order of utilizing ITC under the GST Act 2017 depends on the type of credit you have:

1. Integrated Tax (IGST) Credit:

• Utilize IGST credit first towards payment of IGST liability.
• Remaining IGST credit, if any, can be used towards payment of Central Tax (CGST) or State Tax (SGST) in Tamil Nadu, in any order.

2. Central Tax (CGST) or State Tax (SGST) Credit:

• Utilize CGST credit only towards payment of CGST liability.
• Similarly, utilize SGST credit only towards payment of SGST liability in Tamil Nadu.

Important Note:

• The above order is mandatory as per Rule 88A of the CGST Rules, 2017, effective from July 1, 2019.
• This rule applies uniformly across all states, including Tamil Nadu.

Example:

Let’s say you have the following ITC in your electronic credit ledger:

• IGST Credit: ₹5,000
• CGST Credit: ₹3,000
• SGST Credit (Tamil Nadu): ₹2,000

Your GST liabilities are:

• IGST: ₹4,000
• CGST: ₹2,000
• SGST (Tamil Nadu): ₹1,500

Here’s how you would utilize your ITC:

1. Utilize ₹4,000 of your IGST credit towards your IGST liability. This leaves you with a remaining IGST credit of ₹1,000.
2. You can utilize this remaining ₹1,000 IGST credit towards either your CGST liability or SGST (Tamil Nadu) liability. Let’s say you choose to use it for CGST.
3. This leaves you with ₹1,000 remaining CGST liability and ₹1,500 SGST (Tamil Nadu) liability.
4. Utilize your ₹3,000 CGST credit to fully pay off your CGST liability.
5. Utilize your ₹2,000 SGST (Tamil Nadu) credit to pay ₹1,500 of your SGST (Tamil Nadu) liability. This leaves you with ₹500 remaining SGST liability.

Remember: You cannot use your CGST credit to pay SGST liability or vice versa.

FAQ QUESTIONS

1. What is the current order of utilising ITC under GST Act, 2017 ?

• As of today (February 23, 2024), the order is:
  • Fully utilize IGST credit first: This means you must use all your available ITC on Integrated Goods and Services Tax (IGST) before utilizing any Central GST (CGST) or State GST (SGST) credit.
  • Then utilize CGST or SGST credit: Whichever is higher, either your CGST or SGST credit, can be used next.

2. When did this order change under GST Act, 2017?

• The current order came into effect on July 1, 2019. Before that, the order was to utilize CGST and SGST credit first, followed by IGST credit.

3. Why is there a specific order under GST Act, 2017?

• This order helps minimize fund settlements between the central and state governments related to IGST.

4. Are there any exceptions to this order under GST Act, 2017?

• Yes, there are a few exceptions:
  • Export of goods and services: For exports, you can utilize any type of ITC (IGST, CGST, or SGST) first, regardless of the usual order.
  • Composition taxpayers: Composition taxpayers have a simplified ITC utilization method and don’t need to follow the specific order.
  • Specific notifications: The government might issue notifications for certain sectors or situations with different ITC utilization rules.

5. What are the consequences of not following the order under GST Act, 2017?

• If you don’t utilize ITC in the correct order, you might face:
  • Interest and penalty: You may be liable to pay interest on the tax amount you should have paid using the correct ITC order.
  • Demand for tax payment: The tax authorities might demand you pay the tax amount you should have utilized ITC for.

CASE LAWS

The order of utilization of input tax credit (ITC) under the GST Act, 2017 is primarily governed by Rule 88A of the CGST Rules, 2017, with clarifications provided by Circular No. 98/17/2019 and judicial pronouncements on specific situations. Here’s a breakdown:

Rule 88A:

• Integrated Tax (IGST) Credit:
  • Must be fully utilized first towards payment of IGST liability.
  • Any remaining IGST credit can then be used for Central Tax (CGST) and State Tax (SGST)/Union Territory Tax (UTGST), in any order.
• CGST, SGST/UTGST Credit:
  • Can only be used after exhausting the available IGST credit.
  • Can be utilized towards payment of IGST, CGST, SGST/UTGST, as the case may be, in any order.

Circular No. 98/17/2019:

• Reiterates the mandatory utilization sequence: IGST -> CGST -> SGST/UTGST.

Case Laws:

While there are no specific case laws directly addressing the general order of ITC utilization, there are rulings on related aspects like:

• Time Limit for Claiming ITC: High Courts have upheld the time limit for claiming ITC under Section 16(4) of the CGST Act, clarifying that ITC is a concession, not a right.
• Ineligible ITC: Judgments have addressed specific scenarios where ITC was deemed ineligible due to non-compliance with conditions.