Utilization of Electronic Cash and Input Tax Credit (ITC) Ledger

juggler-e1619189289459.jpg

Utilization Principles

Source: https://tutorial.gst.gov.in/userguide/returns/index.htm#t=Utilization_Principles.htm

FAQs > Utilization of Electronic Cash and Input Tax Credit (ITC) Ledger

I was trying to make payment of the tax and was trying to offset my liability from the Electronic Cash Ledger; however I faced error. On what basis can I utilize the balance in Electronic Cash ledger?

The utilization of Cash from Electronic Cash Ledger is done on the basis of following principles:

RULE 1:

The amount of Cash deposited for CGST/SGST/UTGST/IGST/Cess in the Electronic Cash Ledger can be used for payment of CGST/SGST/UTGST/IGST/Cess liabilities respectively. No inter head adjustment is allowed for major heads.

RULE 2:
Cash deposited under the minor head i.e. Tax/Interest/Fee/Penalty/Others in the Electronic Cash Ledger can be utilized for payment of Tax/Interest/Fee/Penalty/Others liabilities respectively of the same major head. No minor head adjustment is allowed.

RULE 3:
Amount under Cash Ledger will be used in the following priority order:
   (a) self-assessed tax, and other dues related to returns of previous tax periods;
Previous month tax liability covers:
a. Tax liability reported but not paid
b. Interest/penalty/fee arising out of previous month return period declarations
   (b) self-assessed tax, and other dues related to return of current tax period;
Current month tax liability includes:
a. Liability for invoices and amendments uploaded for previous months
b. ITC reversal due to mismatch of invoice (Reversal under Section 42 (5) & (6) for (M-2) Tax Period)
c. Tax amount increased in M Tax period as a consequence of reduction of liability by supplier in (M-2) tax period but without corresponding reduction in ITC by the receiver (Section 43(6))
d. Liability for invoices and other consolidated declarations uploaded for current month.
    (c) Any other amount payable under the Act or the rules made thereunder including the demand determined under section 73 or 74.

RULE 4:
The amount allowed to be entered for utilization of cash can’t be more than the amount of balance available under the respective major/minor head of tax in Cash Ledger.

How to utilize the Input Tax Credit?:

RULE 1:
Credit can be utilized to pay off the liabilities in the following manner:
   (a) IGST input tax credit shall first be utilized towards payment of IGST liability and the amount remaining, if any, may be utilized towards the payment of CGST, SGST/UTGST liabilities in any order, before utilizing the CGST, SGST/UTGST credit.
   (b) CGST input tax credit shall first be utilized towards payment of CGST liability and the amount remaining, if any, may be utilized towards the payment of IGST liability. CGST credit shall be utilized only if IGST credit is not available.
   (c) SGST/UTGST input tax credit shall first be utilized towards payment of SGST/UTGST liability and the amount remaining, if any, may be utilized towards payment of IGST liability (if no CGST credit is available). SGST/UTGST credit shall be utilized only if IGST credit is not available.
   (d) CGST input tax credit cannot be utilized towards payment of SGST/UTGST liabilities and
   (e) SGST/UTGST input taxed credit cannot be utilized towards payment of CGST liabilities.

RULE 2:

ITC cannot be utilized for payment of reverse charge liabilities.

RULE 3:
ITC can be utilized for payment of tax only.

RULE 4:
ITC can’t be utilized for payment of TDS/TCS/interest/penalty/fee/others.

RULE 5:
The amount allowed to be entered for utilization of credit can’t be more than the amount of balance available in the Electronic Credit
Ledger.

RULE 6:
A unique transaction number shall be generated at the Common Portal for each debit or credit to the electronic cash or credit or liability ledger and the same will be reflected in the corresponding ledgers of the taxpayer.

RULE 7:
Credit availed on input CESS paid on inward supplies will be available for set-off against any output tax liability of Cess only. There is no Inter head adjustment for Cess Input Tax Credit.

E-invoice in India (Updated as on 1.1.2021)

GST_E-Way-bill_2-770x433.jpg

E-invoice in India
(Updated as on 1.1.2021)

At present, e-invoicing is required for invoices, credit notes and debit notes issued by a
registered person, other than
➢ SEZ units
➢ insurer or a banking company or a financial institution, including a non-banking
financial company
➢ goods transport agency supplying services in relation to transportation of goods by road
in a goods carriage
➢ suppliers of passenger transportation service
➢ suppliers of services by way of admission to exhibition of cinematograph films in
multiplex screens.

IMPORTANT TERMS USED :

  1. E-invoice Schema (INV-1)
  2. Invoice Registration Portal (IRP)
  3. Invoice Reference Number (IRN) and Quick Response Code (QR Code)
  4. IRP-generated QR Code Vs. Self –generated Dynamic QR Code

Much more …

CLICK HERE TO DOWNLOAD FULL CONTENT in pdf

File size: 1 mb       File type: PDF

GST me Naya Saal, Aur taxpayer Behaal

Input-Tax-Credit-e1573731489177.jpg

Courtesy : CA Umesh Sharma

[email protected]

Arjun (Fictional Character): Krishna, massive changes have been made in the GST law to take effect from 1st January 2021. What is the need for such changes?

Krishna (Fictional Character): Arjuna, the year 2020 has seen a large number of false transactions & malpractices of the taxpayers. Hence in the new year 2021, to curb malpractices used by taxpayers for tax evasion, the GST department is now implementing its new tools to brush out anomalies in the system.

Arjun (Fictional Character): Krishna, what the critical changes that taxpayers need to take severe care of?

Krishna (Fictional Character): Arjuna, here is the gist of the major changes which will take effect from this new year :

I – Registration (Rule 8): Along with the verification of original copies of documents uploaded in FORM GST REG-01, the taxpayer is given the option for authentication of the Aadhar number. If any taxpayer does not opt for such authentication or fails to do so, then the time limit for the system based GST registration for such taxpayer is increased from 3 days to 7 days. Further, if the department feels fit to carry out physical verification, the time limit shall be 30 days instead of 7 days.

II – Cancellation of registration (Rule 21): Any taxpayer under GST, if found to violate the three provisions given below, registration of such taxpayer shall be canceled:

i. Violation of the provisions of Section 16 i.e. Input Tax Credit.

ii. Furnishes excess outward supply in GSTR-1 as compared to that furnished in GSTR-3B.

iii. Violates the provision of rule 86 B (1% payment through cash ledger).

III – Suspension of Registration: Taxpayer’s registration can be suspended in cases where there are Significant differences or anomalies in [GSTR-1 & GSTR-3B], [GSTR-3B & GSTR-2B (ITC)] and any other contravention of the GST Act, 2017.

IV – Reduction in the percentage of ITC as per statement GSTR-2B w.e.f. 01-01-2020: Rule 36(4) which earlier allowed taxpayers to take provisional ITC of 10%, the same now has been reduced to 5%. This change will have a big impact on tax liability, and cause hardships to small taxpayers who file quarterly returns.

V – Restriction on Filing of GSTR-1 & GSTR-3B :

i. Small taxpayers will not be able to file GSTR-1 if they have not filed GSTR-3B for the last 2 months.

ii. For taxpayers who have opted for quarterly filing of GSTR-1 are not allowed to file GSTR-1 if they have not filed GSTR-3B for the last quarter.

iii. Large taxpayers are not allowed to file monthly GSTR-1 if GSTR-3B is not filed for the last period.

VI – Using Credit ledger only up to 99% (Rule 86B): Now, taxpayers can use their credit ledger against GST liability only up to 99%, therefore paying 1% of their liability in cash. Rule 86B will apply when the value of the monthly taxable supply is more than 50 Lakhs. This rule excludes exempt & Nil rated supply. This rule shall not apply in four cases :

i. Taxpayers who have paid Income tax of Rs. 1 Lakh or more in the last two Financial years.

ii. Received refund of GST of Rs. 1 lakh in a respective financial year.

iii. Discharged tax liability above 1% of total tax cumulatively up to a current month of FY.

iv. Any Government department, Public sector Unit, Local Authority, etc.

VII – Change in E-way bill (Rule 138): The transport vehicles will now have to run faster, to comply with the limit as per rule 138 which has been changed to 200 km. From 100 km. earlier.

Arjun (Fictional Character): Krishna, what should the taxpayer learn from this?

Krishna (Fictional Character): Arjuna, taxpayers need to be watchful about GST compliances, otherwise “Nazar hati, to durghatna ghati” will prove its essence. Let’s hope that genuine taxpayers will not get harassed. Wish all of you a very happy, healthy & wealthy new year.

scroll to top