Payment of Tax under GST: Understanding the Payment Process under GST
Updated: Oct 27
The payment of tax under GST (Goods and Services Tax) is an essential process for every registered taxpayer in India. Understanding how tax payments work, the rules governing them, and the utilization of input tax credit (ITC) can greatly help businesses maintain compliance and avoid penalties. The process is designed to be transparent and efficient, with the use of electronic ledgers that track tax liabilities and payments.
In this detailed article, we will walk through the entire GST payment process, including how to use the electronic ledgers, the rules around ITC, and the steps to pay GST online. Additionally, we will address some common questions and clarify essential terms such as GST payable meaning and set off of GST.
Table of Content
The Role of Electronic Ledgers in GST Payments
The Basics of the GST Payment Process
GST is a value-added tax levied on the supply of goods and services in India. It is a destination-based tax where the liability to pay GST arises at the time of making taxable supplies. Understanding the tax payment process under GST is crucial for businesses to ensure they meet their obligations.
What Does GST Payable Mean?
The term GST payable refers to the total tax liability that a taxpayer owes to the government for a particular tax period. This liability is calculated based on the taxpayer's outward taxable supplies (sales), after considering any eligible input tax credit (ITC) on purchases.
GST liability can include:
Central Goods and Services Tax (CGST)
State Goods and Services Tax (SGST)
Any applicable cess
The GST system allows taxpayers to offset their tax liabilities with available ITC, provided they comply with certain set-off rules. The remaining liability, after the utilization of ITC, must be paid in cash through the GST portal.
Step-by-Step Guide to Payment of Tax under GST
The GST payment process is straightforward, thanks to the government's digitized system. Here is a step-by-step guide to help you navigate the process:
Calculate Tax Liability: The first step is to calculate the total GST payable after adjusting eligible input tax credit. This includes CGST, SGST, and IGST liabilities.
Utilize Input Tax Credit (ITC): Use the available ITC in the electronic credit ledger to set off your tax liability. This reduces the cash outflow required for paying taxes.
Deposit Funds into the Electronic Cash Ledger: If there is any outstanding liability after utilizing ITC, you must deposit funds into your electronic cash ledger.
File GST Returns: Taxpayers must file their GST returns using forms such as GSTR-3B or GSTR-1, as applicable. The returns must show the correct tax liability for the tax period.
Make Payment: After filing the returns, any remaining tax liability must be cleared by debiting the appropriate amounts from the electronic cash or credit ledger.
The Role of Electronic Ledgers in GST Payments
The GST system has introduced three primary ledgers that track tax liabilities, input tax credit, and cash balances. These ledgers ensure transparency and help businesses manage their tax obligations efficiently.
What Are Electronic Ledgers in GST?
Electronic ledgers are online accounts that record the various types of payments, credits, and liabilities of a taxpayer. These ledgers can be accessed via the GST portal and include:
Electronic Liability Ledger
Electronic Credit Ledger
Electronic Cash Ledger
Each ledger serves a distinct purpose, ensuring that taxpayers can track their GST payments, credits, and outstanding liabilities in real time.
1. Electronic Liability Ledger
The electronic liability ledger is where all liabilities under GST, including tax, interest, penalties, and fees, are recorded. It reflects the total amount due for each tax period and is updated every time a liability arises from return filings or notices issued by tax authorities.
GST payable meaning: This is the total tax due to the government, as recorded in the electronic liability ledger. The amount payable includes CGST, SGST, IGST, and any applicable cess.
2. Electronic Credit Ledger
The electronic credit ledger is where all the eligible ITC is recorded. Taxpayers can use the balance in this ledger to offset their tax liabilities. The ITC recorded in the electronic credit ledger includes taxes paid on purchases of goods and services.
Electronic credit ledger in GST meaning: This ledger is essentially the account where all eligible input tax credits are maintained. It helps taxpayers reduce their overall tax liability by using ITC to offset output tax liabilities.
3. Electronic Cash Ledger
The electronic cash ledger functions as a digital wallet where taxpayers can deposit cash to pay their outstanding tax liabilities. Once a taxpayer deposits money into the electronic cash ledger, they can use it to pay taxes, penalties, fees, or any other liabilities under GST.
Payment of Tax under GST: Set-Off Rules and Cross-Utilization of ITC
Input Tax Credit (ITC) is a major benefit under the GST system, allowing taxpayers to reduce their tax liabilities by using the tax already paid on purchases of goods and services. However, there are specific rules that govern how ITC can be utilized to set off various tax liabilities.
How to Set Off GST Liabilities
The set off of GST involves using the available ITC to reduce the tax payable under different GST components. Here’s a breakdown of the set-off rules:
IGST Liability: The credit for IGST can be used to set off IGST liability first, followed by CGST and SGST/UTGST liabilities.
CGST Liability: The credit for CGST can only be used to pay CGST or IGST liabilities. It cannot be used to pay SGST or UTGST.
SGST/UTGST Liability: The credit for SGST or UTGST can only be used to pay SGST or UTGST liabilities or IGST. It cannot be used to pay CGST.
Here’s a simplified view of the set-off rules:
Type of Credit | Used to Pay First | Then Used to Pay | Cannot Be Used For |
IGST | IGST | CGST, SGST/UTGST | - |
CGST | CGST | IGST | SGST/UTGST |
SGST/UTGST | SGST/UTGST | IGST | CGST |
Can We Use CGST and SGST Credit Against IGST?
Yes, CGST and SGST credits can be used to set off IGST liabilities. However, CGST credit cannot be used to offset SGST liabilities, and vice versa. The order of set-off is clearly defined in the GST law to avoid misapplication of credits.
Payment of Tax under GST: Interest and Penalties for Delayed Payments
Failing to pay your GST liabilities on time can lead to penalties and interest charges. The GST system imposes interest on delayed payments at a rate of 18% per annum. This interest is calculated from the due date of payment until the actual date of payment.
Taxpayers must ensure that their payment under GST is completed on or before the due date to avoid additional financial burdens.
Payment of Tax under GST: Additional Considerations
What Does "Payment Under Process" Mean?
At times, when making GST payments, the status may show "payment under process" on the GST portal. This simply means that the payment is being verified and processed by the system. Once the process is complete, the payment will be reflected in the respective ledger.
Unique Identification Number for GST Transactions
Every transaction under the GST regime is assigned a unique identification number to ensure that it can be traced and verified. This feature enhances transparency and helps businesses maintain proper records of all transactions related to tax payments.
TaxBuddy's Services
As India's trusted GST filing platform, we offer a comprehensive range of services designed to streamline your GST compliance journey. Whether you're looking for GST registration assistance, seamless GST return filing, expert advice, or reliable GST audit services, TaxBuddy has you covered.
FAQ
1. What is the GST payment process step by step?
The GST payment process involves calculating liabilities, utilizing ITC, depositing funds into the electronic cash ledger, and filing returns on the GST portal.
2. What is the electronic liability ledger in GST?
The electronic liability ledger records the total tax, interest, penalties, and other amounts payable by the taxpayer under GST.
3. Can I use CGST and SGST credit against IGST?
Yes, CGST and SGST credits can be used to offset IGST liability, but CGST cannot be used to pay SGST, and vice versa.
4. What is the difference between the electronic cash ledger and the electronic credit ledger?
The electronic cash ledger contains the cash deposited by the taxpayer, while the electronic credit ledger records ITC available for offsetting tax liabilities.
5. How do I set off GST liability using ITC?
GST liabilities are set off by using the credit in the electronic credit ledger according to the prescribed set-off rules.
6. What happens if I delay my GST payment?
If you delay GST payment, you will be charged interest at 18% per annum, calculated from the due date until the actual payment date.
7. How is GST paid to the government?
GST is paid through the GST portal by utilizing balances from the electronic credit or cash ledger.
8. Can we transfer funds between different tax heads?
Yes, you can transfer funds between different tax heads (CGST, SGST, IGST) using Form GST PMT-09 on the GST portal.
9. What does 'payment under process' mean on the GST portal?
"Payment under process" indicates that the GST payment is being verified and will soon be reflected in the ledgers.
10. What is the unique identification number for GST transactions?
Each GST transaction is assigned a unique identification number, ensuring transparency and traceability of payments.
Comments