Payment of GST Tax, Modes, Utilization of Input Tax Credit, Due Dates and Procedure

Payment of GST is the process by which a registered taxable person discharges their tax liability to the government on a periodic basis. Unlike the old regime where separate payments were made for Central and State taxes, GST consolidates the payment into a single electronic platform. Every taxpayer must calculate their output tax liability on outward supplies, reduce it by eligible Input Tax Credit (ITC), and pay the net amount in cash. Payments are made through the GST Portal using three electronic ledgers—Electronic Tax Liability Register, Electronic Credit Ledger, and Electronic Cash Ledger. The taxpayer generates a challan on the portal and makes payment via internet banking, NEFT/RTGS, or over-the-counter. Payment is due by the 20th of the following month (or quarterly for composition dealers), failing which interest at 18% p.a. and late fees apply.

Modes of Payment under GST:

1. Internet Banking (Net Banking)

Internet Banking is the most widely used digital mode for GST payment. The taxpayer logs into the GST Common Portal, creates a challan on the PMT-06 form, and selects the “Internet Banking” option. Upon confirmation, the portal redirects the user to their respective bank’s net banking page. The taxpayer authenticates the transaction using their login credentials and OTP. The amount gets debited instantly from the taxpayer’s current or savings account and is credited to the government’s designated account. The paid amount then reflects in the Electronic Cash Ledger, which can be utilized for discharging tax liability. This mode is available 24/7, offers instant confirmation via challan generation, and does not require any physical paperwork. It is convenient, secure, and free of cost, making it the preferred choice for most registered taxpayers across India.

2. NEFT / RTGS (National Electronic Funds Transfer / Real Time Gross Settlement)

NEFT and RTGS are traditional banking channels available for GST payment. The taxpayer first generates a challan on the GST portal with a unique CIN (Challan Identification Number). Instead of making an online payment, they visit their bank branch and submit the challan copy along with a cheque or transfer request. The bank debits the taxpayer’s account and transfers funds to the government’s nodal account via NEFT (batch processing, ₹1 Lakh limit for RTGS, no lower limit) or RTGS (real-time, ₹2 Lakhs minimum, no upper limit). After successful credit, the RBI (Reserve Bank of India) intimates the GST portal, and the amount reflects in the Electronic Cash Ledger within a few hours. This mode is useful for taxpayers with high-value transactions or limited internet access, though it involves branch visits and bank processing time.

3. Over-the-Counter (OTC) Payment / Offline Mode

Over-the-Counter (OTC) payment is a physical, offline mode available for taxpayers who cannot use digital channels. Under this mode, the taxpayer generates a challan on the GST portal and takes a printout. They visit an authorized bank branch (nominated by the RBI for GST collection) and tender the payment in cash, cheque, or demand draft. For cash payments, the limit is capped at ₹10,000 per challan. For cheque/DD, the amount is credited only after clearance and may take 2-3 days to reflect in the Electronic Cash Ledger. This mode is gradually being phased out for corporate taxpayers but remains available for smaller dealers and individuals in rural or remote areas. OTC payment requires physical presence, bank working hours, and carries the risk of loss or delay, making it the least preferred option.

4. Unified Payments Interface (UPI) and QR Code

UPI and QR Code-based payments are modern, real-time digital modes introduced to simplify small-value GST payments. The taxpayer generates a challan on the GST portal and selects the UPI option. A dynamic QR code or UPI ID (e.g., the taxpayer’s VPA – Virtual Payment Address) is displayed. Using any UPI-enabled app (Google Pay, PhonePe, Paytm, BHIM, etc.), the taxpayer scans the QR code or enters the VPA, authenticates with their UPI PIN, and completes the payment instantly. The amount is debited from the taxpayer’s linked bank account and credited to the government’s nodal account in real-time. The maximum limit per UPI transaction is ₹1,00,000. This mode is highly convenient, available 24/7, requires no net banking credentials, and provides instant confirmation, making it ideal for small taxpayers, professionals, and quick top-ups of the Electronic Cash Ledger.

5. Nodal Account / TIN (Tax Information Network) Settlement

Nodal Account settlement is not a direct payment mode but a back-end mechanism used by large taxpayers, especially banks and financial institutions. Under this system, the taxpayer maintains a designated nodal account with a specified bank. The GST portal generates a challan and auto-debits the required amount from this nodal account using a standing instruction/debit mandate. The funds are then transferred to the government’s principal account through the RBI’s TIN (Tax Information Network) system. This mode is typically used for TDS (Tax Deduction at Source) and TCS (Tax Collection at Source) payments where deductors collect or deduct tax on behalf of others. The settlement happens via batch processing, and the credit reflects in the taxpayer’s Electronic Cash Ledger within a day. This mode ensures seamless, bulk, and error-free payments for institutional taxpayers with recurring high-volume liabilities.

6. Physical Challan cum Cheque / DD at Bank Branch

This is the most traditional and fully offline mode of GST payment. The taxpayer logs into the GST portal and generates a physical challan (Form GST PMT-06) with a CIN. They fill out the challan with the amount, tax head, and their GSTIN, and sign it. The taxpayer then submits the challan along with a cheque or demand draft (DD) drawn in favor of the “Government of India” or the respective State Government, at a designated authorised bank branch. The cheque/DD is deposited and cleared through the banking system. Upon clearance (usually 2-3 working days), the bank updates the GST portal, and the amount gets credited to the Electronic Cash Ledger. This mode is rarely used now due to delays, manual intervention, and clearance risks. It is generally avoided except by taxpayers in extreme remote areas with no digital infrastructure.

Utilization of Input Tax Credit (ITC) for GST Payment:

• Utilization of CGST Credit

The Input Tax Credit of Central Goods and Services Tax (CGST) is first utilized for the payment of CGST liability. If any CGST credit remains after fully paying the CGST liability, it may be used to pay the Integrated Goods and Services Tax (IGST) liability. However, CGST credit cannot be utilized for the payment of State Goods and Services Tax (SGST) or Union Territory Goods and Services Tax (UTGST) liability. This utilization order ensures proper distribution of tax revenue between the Central and State Governments under the GST framework.

• Utilization of SGST Credit

The Input Tax Credit of State Goods and Services Tax (SGST) is first utilized for the payment of SGST liability. If any SGST credit remains after fully discharging the SGST liability, it may be utilized for the payment of Integrated Goods and Services Tax (IGST) liability. SGST credit cannot be used to pay Central Goods and Services Tax (CGST) liability. This restriction maintains the separate accounting of Central and State tax revenues and ensures proper implementation of the GST credit mechanism.

• Utilization of UTGST Credit

The Input Tax Credit of Union Territory Goods and Services Tax (UTGST) is first utilized for the payment of UTGST liability. Any remaining UTGST credit may then be used for payment of Integrated Goods and Services Tax (IGST) liability. However, UTGST credit cannot be utilized for payment of Central Goods and Services Tax (CGST) liability. This order of utilization is prescribed under the GST law to ensure proper allocation of tax revenue and smooth administration of GST in Union Territories without a legislature.

• Utilization of IGST Credit

The Input Tax Credit of Integrated Goods and Services Tax (IGST) is utilized first for payment of IGST liability. If any IGST credit remains, it is then utilized for the payment of CGST liability and thereafter for SGST or UTGST liability, in the prescribed order. This utilization sequence facilitates the seamless flow of tax credit between the Centre and the States. It also supports interstate trade by ensuring efficient adjustment of tax credits across different types of GST.

Due Dates for Payment of GST:

1. Regular Taxpayers

Regular taxpayers must pay GST on or before the due date for filing the relevant GST return. The tax liability is discharged through the electronic cash ledger or by utilizing eligible Input Tax Credit. Timely payment helps avoid interest, penalties, and other legal consequences under the GST law.

2. Composition Scheme Taxpayers

Taxpayers registered under the Composition Scheme are required to pay GST on a quarterly basis as prescribed under the GST law. They must deposit the tax due within the prescribed time and file the required statement or return. Timely payment ensures continued eligibility under the Composition Scheme.

3. Non Resident Taxable Persons

A Non Resident Taxable Person (NRTP) is required to pay GST in advance based on the estimated tax liability for the period of registration. Additional tax must be paid if the estimated liability increases. Compliance with payment provisions is mandatory to continue business operations in India.

4. Casual Taxable Persons

A Casual Taxable Person (CTP) must deposit GST in advance based on the estimated tax liability before commencing business. If the registration period is extended, additional tax must also be deposited. This ensures that the expected tax liability is covered during the temporary period of registration.

5. Tax under Reverse Charge Mechanism (RCM)

Under the Reverse Charge Mechanism (RCM), the recipient of goods or services is responsible for paying GST instead of the supplier. The tax must be paid within the prescribed due date applicable to the recipient’s GST return. Input Tax Credit may be claimed subject to the prescribed conditions.

6. Interest on Delayed Payment

If GST is not paid by the prescribed due date, the taxpayer is liable to pay interest on the outstanding tax amount. Interest is calculated for the period of delay as provided under the CGST Act, 2017. Timely payment helps avoid additional financial liability and penalties.

7. Electronic Payment of GST

GST payments are made electronically through the official GST portal using internet banking, NEFT, RTGS, UPI, debit cards, credit cards, or other approved payment methods. The electronic payment system ensures secure, transparent, and efficient collection of taxes while reducing paperwork and manual processing.

8. Importance of Timely GST Payment

Timely payment of GST ensures compliance with the GST law and helps businesses avoid interest, penalties, and legal proceedings. It also enables smooth filing of GST returns, uninterrupted claim of Input Tax Credit, and better financial management. Regular compliance improves the credibility of the taxpayer and supports efficient tax administration.

Procedure for Payment of GST:

1. Determine the GST Liability

The first step in the payment of GST is to determine the total tax liability for the relevant tax period. The taxpayer calculates the GST payable after considering outward supplies, inward supplies, eligible Input Tax Credit (ITC), and any applicable interest or penalty. Accurate calculation ensures correct payment of tax.

2. Generate a Payment Challan

The taxpayer logs into the official GST portal and generates an electronic payment challan in Form GST PMT 06. The challan contains details such as GSTIN, tax amount, tax period, and the type of tax to be paid. A unique challan number is generated for making the payment.

3. Make the GST Payment

The taxpayer pays the GST using the generated challan through approved payment methods such as internet banking, NEFT, RTGS, UPI, debit card, credit card, or other authorized banking channels. After successful payment, the amount is credited to the taxpayer’s Electronic Cash Ledger on the GST portal.

4. Utilize Input Tax Credit

Before making cash payment, the taxpayer utilizes the available Input Tax Credit (ITC) in the Electronic Credit Ledger to discharge eligible GST liability. The remaining tax, if any, is paid from the Electronic Cash Ledger. Proper utilization of ITC helps reduce the amount payable in cash.

5. Offset the Tax Liability

After sufficient balance is available in the Electronic Cash Ledger and Electronic Credit Ledger, the taxpayer offsets the GST liability through the GST portal. The system automatically adjusts the available balance against the outstanding tax liability in the prescribed order under the GST law.

6. File the GST Return

After payment and adjustment of tax liability, the taxpayer files the applicable GST return within the prescribed due date. The return includes details of taxable supplies, Input Tax Credit claimed, tax paid, and any other required information. Timely filing completes the GST payment process and ensures legal compliance.

7. Download the Payment Receipt

Once the GST payment is successfully completed and the return is filed, the taxpayer can download the payment receipt or challan from the GST portal. The receipt serves as proof of tax payment and should be preserved for future reference, audit, assessment, or verification by the GST authorities.

8. Maintain Payment Records

The taxpayer should maintain proper records of GST challans, payment receipts, returns, and related documents for the period prescribed under the GST law. Proper record maintenance facilitates audits, assessments, reconciliation of accounts, and verification of tax payments while ensuring compliance with statutory requirements.

Interest, Late Fee, and Penalties for Delayed Payment:

1. Interest on Delayed Payment

Under Section 50 of the CGST Act, 2017, interest is payable when a registered person fails to pay GST within the prescribed due date. Interest is charged on the outstanding tax amount from the day following the due date until the actual date of payment. The applicable rate of interest is notified by the Government and may vary depending on the nature of the default. Interest is a statutory liability and must be paid even if the delay is unintentional. Timely payment of GST helps taxpayers avoid additional financial burden, maintain proper compliance, and ensure smooth business operations under the GST system.

2. Late Fee for Delayed Filing of Returns

A late fee is imposed when a registered taxpayer fails to file GST returns within the prescribed due date. The late fee is charged for each day of delay, subject to the maximum limit specified under the GST law and relevant notifications. It is different from interest, as it is levied for delayed filing of returns rather than delayed payment of tax. The late fee must be paid before the pending return can be successfully filed. Timely filing of GST returns helps businesses avoid additional costs, maintain compliance, and ensure uninterrupted availability of Input Tax Credit and other GST benefits.

3. Penalty for Non Payment or Short Payment of GST

A penalty may be imposed when a taxpayer fails to pay GST, pays less tax than required, wrongly claims Input Tax Credit, or incorrectly obtains a refund. The penalty provisions are governed by the CGST Act, 2017 and depend on the nature of the default. If the default is due to genuine error without fraud, a lower penalty may apply. However, where fraud, wilful misstatement, or suppression of facts is involved, higher penalties are prescribed. These provisions encourage voluntary compliance, prevent tax evasion, and protect government revenue under the GST system.

4. Penalty for Failure to Obtain Registration

A person who is liable to obtain GST registration but fails to register within the prescribed time may be liable to a penalty under the GST law. Operating a business without mandatory registration may also lead to recovery of unpaid tax, interest, and other legal consequences. GST registration is essential for collecting tax, issuing tax invoices, and complying with statutory requirements. Timely registration helps businesses avoid penalties, ensures lawful conduct of business activities, and enables the taxpayer to claim eligible Input Tax Credit and other benefits available under the GST system.

5. Penalty for Incorrect Invoicing

Every registered taxpayer is required to issue tax invoices containing the prescribed particulars under the GST law. Issuing incorrect invoices, fake invoices, or invoices without actual supply of goods or services may attract penalties and other legal action. Incorrect invoicing affects tax collection, Input Tax Credit claims, and overall compliance with GST provisions. The GST authorities may impose penalties and initiate recovery proceedings in serious cases. Maintaining accurate and genuine invoices ensures transparency, supports proper tax administration, and protects businesses from unnecessary legal disputes and financial liabilities.

6. Penalty for Failure to Maintain Records

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p style=”text-align: justify;” data-start=”3335″ data-end=”3976″>The GST law requires every registered taxpayer to maintain proper books of accounts, invoices, stock records, tax payment details, and other prescribed documents. Failure to maintain these records or producing incorrect records during inspection or audit may result in penalties under the CGST Act, 2017. Proper record maintenance enables accurate tax calculation, smooth return filing, and verification by GST authorities. It also helps businesses claim eligible Input Tax Credit and respond effectively during audits or assessments. Maintaining complete and accurate records is an essential responsibility of every registered taxpayer.