Indian businesses are in for a learning curve — the payment process under Goods and Services Tax (GST) differs drastically from current procedures. Namely, each step of the process — like all other aspects of GST — now occur online within the GST portal.
Section 49 of the Central Goods and Services Tax Act, along with rules published by the Central Board of Excise and Customs (CBEC), govern the new payment procedures. This whitepaper provides an overview of what they entail and looks at the following:
- Electronic ledgers
- Manner of utilization and cross-utilisation of input tax credit (ITC)
- Interest on delayed payments
- Electronic payment forms
- Unique identification number for each transaction
In the GST portal, a taxable person can track his tax liabilities across three ledgers, each maintained in real-time:
- Electronic liability ledger (also known as electronic tax liability register): Accounts for a taxpayer’s gross tax liability — form GST PMT-01 on the GST portal
- Electronic credit ledger (also known as electronic input tax credit ledger): Records the tax payments already made during the supply chain e. every claim of ITC is recorded here — form GST PMT-02
- Electronic cash ledger: All amounts paid by the taxpayer are reflected here — form GST PMT-05
Electronic liability ledger
This ledger records all liabilities of a taxable person including:
- The tax, interest, late fees, or any other amount payable per the return furnished by the taxpayer or per any proceedings
- The tax and interest payable arising out of any mismatch of ITC or output tax liability
- Any interest that may accrue from time to time
- The reversal of ITC or interest
Taxpayers should settle their liabilities in the following order:
- Self-assessed tax and other dues, such as interest, penalty, fees, or any other amount relating to previous tax period returns
- Self-assessed tax and other dues relating to the current tax period return
- Any other amount payable under the act/rules (liability arising out of demand notice, proceedings, etc.)
Electronic credit ledger
Every claim of ITC self-assessed by the taxpayer shall be credited to this ledger. The amount available in this ledger may be used for payment towards output tax only. Under no circumstance can an entry be made directly in the electronic credit ledger.
This ledger may include the following:
- ITC on inward supplies from registered taxpayers
- ITC available based on distribution from input services distributor (ISD)
- ITC on input of stock held/semi-finished goods or finished goods held in stock on the
day immediately preceding the date on which the taxpayer became liable to pay tax, provided he applies for registration within 30 days of becoming liable
- Permissible ITC on inputs held in stock and inputs contained in semi-finished or finished goods held in stock on the day of conversion from composition scheme to regular tax scheme
- ITC eligible on a payment made on a reverse charge basis
Electronic cash ledger
Any amount paid by the taxpayer will be reflected in the electronic cash ledger. The amount available in this ledger may be used for making any payment towards tax, interest, penalty, fees, or any other amount due under the act/rules in the time and manner prescribed. (It is reiterated that any credit in the electronic credit ledger can be utilized only for payment of output tax.)
To initiate a payment, taxpayers generate a challan online using form GST PMT-06, which will be valid for a period of 15 days. Payment can then be remitted through any of the following modes:
- Internet banking (authorized banks only)
- Credit or debit card (authorized banks only)
- National Electronic Fund Transfer (NEFT) or real-time gross settlement (RTGS) (any bank, authorized or unauthorized)
- Over-the-counter (OTC) payment (authorized banks only) for deposits up to ten thousand rupees per challan and per tax period
The taxpayer is responsible for any commission due on the payment.
The payment date shall be recorded as the date the payment is credited to the appropriate government account. The date, the payment is debited from the taxpayer’s account is not relevant.
Unregistered taxpayers needing to make a tax payment will still use the online GST portal but with a temporary identification number generated through the portal.