Payment of GST

2021
Payment
of
GST
(Indirect Tax)
Classroom
Deliberations
CA Dr Prithvi Ranjan Parhi
11:20 AM © CA Dr Prithvi Ranjan Parhi 1

Within the Union Territory:
CGST + UTGST
Foreign Territory to Union
Territory: IGST
Foreign Territory to State: IGST
One State to another State: IGST
Within the State: CGST + SGST
One State to Union Territory:
IGST
Union Territory to Foreign
Territory:
No GST ( Exempted Supply)
State to Foreign Territory:
No GST ( Exempted Supply)
One Union Territory to another Union
Territory : IGST
Union Territory to State: IGST

SGST/CGST/IGST/UTGST ?
Sl Supplier Receiver GST
1 State Same State CGST+SGST
2 State Another State IGST
3 State Union Territory IGST
4 State Foreign Territory Zero rated Supply no GST
5 Union Territory Same Union Territory CGST +UTGST
6 Union Territory Another Union Territory IGST
7 Union Territory State IGST
8 Union Territory Foreign Territory Zero rated Supply no GST
9 Foreign Territory State IGST
1
0
Foreign Territory Union Territory IGST

Understanding CGST, SGST, UTGST & IGST
11:20 AM 4
© CA Dr Prithvi Ranjan Parhi
Foreign
Territory State 1
State 2
Union Territory
IGST
IGST
IGST
IGST
CGST +SGST
CGST +SGST
CGST +UTGST

Compensation Cess
– A GST Compensation Cess at specified rate has been
imposed under the Goods and Services Tax
(Compensation to States) Cess Act, 2017 on the
• specified luxury items or
• demerit goods, like pan masala, tobacco, aerated waters,
motor cars etc., computed on value of taxable supply.
– Compensation cess is leviable on intra-State supplies
and inter-State supplies with a view to provide for
compensation to the States for the loss of revenue
arising on account of implementation of the GST.
11:20 AM 5

Compensation Cess
• GST is charged at the time of supply and depends on the
destination of consumption.
• For instance, if a good is manufactured in state A but
consumed in state B, then the revenue generated through GST
collection is credited to the state of consumption (state B) and
not to the state of production (state A).
• Due to the consumption-based nature of GST, manufacturing
states like Gujarat, Haryana, Karnataka, Maharashtra and Tamil
Nadu feared a revenue loss.
• Thus, GST Compensation Cess or GST Cess was introduced by
the government to compensate for the possible revenue losses
suffered by such manufacturing states.
• However, under existing rules, this compensation cess will be
levied only for the first 5 years of GST regime – from July 1st,
2017 to July 1st, 2022.

Compensation Cess
• All the taxpayers,
– except those who export specific notified goods and
– those who have opted for GST composition scheme,
• are liable to collect and remit the GST compensation cess
to the central government.
• Subsequently, the central government distributes it to
the relevant states.
• Input tax credit can also be claimed on GST Cess paid
during the purchase of notified goods.
• Input tax credit claimed in such a case can only be
utilized for paying the GST Cess and not CGST, SGST or
IGST.

Levy and collection of cess
• All taxpayers who are engaged in the supply of selected goods or services
other than composition taxpayers will collect compensation cess.
• This will also include compensation cess chargeable on certain goods
imported to India.
• Compensation cess is levied over and above the amount of GST charged in
relation to a particular supply.
• The calculation is similar to that of GST – the prescribed rate is applied to the
transaction value given under section 15 of the CGST Act 2017 to arrive at the
cess liability.
• In case of import of goods the transaction value is the value determined under
the Customs Tariff Act, 1975 i.e on the transaction value + Custom duty.
• Example:
• If the goods are imported into India where the assessable value is Rs.1000,
GST rate is 18% and Custom duty is 10%. The Compensation cess is
calculated on the value of Rs.1100 {1000+(1000*10%)}.

Custom Duty in GST Regime
• Under GST Law, GST will subsume
Countervailing Duty (CVD) and Special
Additional Duty (SAD).
• However, Basic Customs Duty will continue
to do its round in the import bills.
• BCD has been kept outside the purview of
GST and will be charged as per the current
law only.

Concept of GST Accounting
• At the time of purchase create
Current Asset- Input credit.
• At the time of Sale create
Current Liability.
• Settle Current Assets with
Current Liability .
• Pay the net Current liability if
any.
Input GST
(Asset)
Output GST
(Liability)
Set off
(Liabilities with
Assets )
Make Payment

2021
Order of
Utilization
of
ITC
Classroom Deliberations

ITC Utilisation
Input Tax Credit Tax Liability
IGST
CGST
SGST
IGST
CGST
SGST

Input Tax Credit
CGST
IGST
First to pay CGST
Second to pay
IGST
Not allowed to
SGST
First to pay SGST
Second to pay
IGST
Not allowed to
CGST
First to pay IGST
Second to pay
CGST
Third to pay SGST
SGST
11:20 AM 13
To be utilised
First
Only after
exhausting
CGST ITC

ITC Utilisation for Cess, Interest, Penalty, Late fee
1. Credit of GST Cess paid can be utilized only
towards payment of the GST Cess liability, not for
IGST/CGST/SGST/UTGST liability.
2. Credit in Electronic Credit Ledger can be used only
for payment of tax.
3. This means that balance of Electronic Credit Ledger
cannot be utilised for payment
of interest, penalty or late fees.
4. Interest and Penalty can be paid only through
actual cash payment.

Utilisation of credit & payment of liability
Type of Tax Available ITC (Rs.) Liability to Pay (Rs.)
IGST 1,000 500
CGST 300 500
SGST 300 500
TOTAL 1,600 1,500

Tax
Type
Available
ITC
(Rs.)
Liability to
Pay
(Rs.)
Liability Set Off (Rs.) Balance
to be
paid in
cash
Balance
Credit ( to
be carried
forward)
Note
IGST 1000 500 500 0 0 1
CGST 300 500 250
(from IGST )
250
(From CGST)
0 50 2 &3
SGST 300 500 250
(from IGST )
250
(From SGST)
0 50
TOTAL 1600 1500 1500 100

Notes
1. Balance ITC of Rs 500/- IGST should be fully
exhausted before utilizing available ITC of CGST &
SGST /UTGST (proviso to rule 88A of CGST Rules
inserted w.e.f. 1-4-2019 and section 49A of CGST
Act.)
2. As per Sec 49(5)(a), ITC to be utilized in the order of
– IGST-CGST – SGST.
3. Rule 88A allows utilizing the remaining amount ( after
utilizing IGST ) in any Order. Thus the best utilization
could have made in the given example.

ITC Utilisation
• It is mandatory to utilise the entire IGST available in
electronic credit ledger before utilising ITC
on CGST or SGST.
• The order of setting off ITC of IGST can be done in any
proportion and any order towards setting off
the CGST or SGST output after utilising the same
for IGST output.
• Credit of CGST cannot be used for payment of
SGST/UTGST and
• Credit of SGST/UTGST cannot be utilised for payment of
CGST.
11:20 AM 18

Order of Utilization of ITC
1. IGST credit should first be utilized towards payment of IGST.
2. Remaining IGST credit, if any, can be utilized towards payment of CGST and
SGST/UTGST in any order and in any proportion, i.e. remaining ITC of IGST
can be utilized –
a) first towards payment of CGST and then towards paymentof SGST; or
b) first towards payment of SGST and then towards paymentof CGST; or
c) towards payment of CGST and SGST simultaneously in any proportion
e.g. 50: 50, 30: 70, 40: 60 and so on.
3. Entire ITC of IGST should be fully utilized before utilizing the ITC of CGST or
SGST/UTGST.
1. ITC of CGST should be utilized for payment of CGST and IGST in that order.
2. ITC of CGST cannot be utilized for payment of SGST/UTGST
1. ITC of SGST /UTGST should be utilized for payment of SGST/UTGST and IGST in
that order.
2. However, ITC of SGST/UTGST should be utilized for payment of IGST, only
afterITC of CGST has been utilized fully.
3. ITC of SGST/UTGST cannot be utilized for payment of CGST.

Utilization of ITC
 Cross-utilization of credit is available only
between CGST - IGST and SGST/UTGST - IGST.
 CGST credit cannot be utilized for payment of
SGST/UTGST .
 SGST/UTGST credit cannot be utilized for
payment of CGST.
• ITC of IGST need to be exhausted fully before
proceeding to utilize the ITC of CGST and SGST
in that order.

Rule 88A : Payment of Tax of the CGST Rules
Order of utilization of input tax credit
• Input tax credit on account of integrated tax shall first be
utilised towards payment of integrated tax, and the amount
remaining, if any, may be utilised towards the payment of
central tax and State tax or Union territory tax, as the case
may be, in any order.
• Provided that the input tax credit on account of central tax,
State tax or Union territory tax shall be utilized towards
payment of integrated tax, central tax, State tax or Union
territory tax, as the case may be, only after the input tax
credit available on account of integrated tax has first been
utilised fully.

Example
Head Output tax liability (Rs.) ITC (Rs.)
IGST 1,000 1,300
CGST 300 200
SGST/UTGST 300 200
Total 1,600 1,700

Option 1
ITC of Discharge of
output IGST
liability (Rs.)
Discharge of
output CST
liability (Rs.)
Discharge of output
SGST/UTGST
liability (Rs.)
Balanceof
ITC
(Rs.)
IGST 1,000 200 100 0
ITC of IGST has been completely exhausted
CGST 0 100 - 100
SGST/UTGST 0 - 200 0
Total 1,000 300 300 100

Option 2
ITC of
Discharge of
output IGST
liability (Rs.)
Discharge of
output CST
liability (Rs.)
Discharge of output
SGST/UTGST
liability (Rs.)
Balanceof
ITC
(Rs.)
IGST 1,000 100 200 0
ITC of IGST has been completely exhausted
CGST 0 200 - 0
SGST/UTGST 0 - 100 100
Total 1,000 300 300 100
There can be other options also for utilization of ITC of IGST against CGST and SGST
liabilities. In this example, two options for utilizing ITC of IGST against CGST and SGST
liabilities are shown.

Conditions to avail Input credit:
1. The dealer should be in possession of Tax Invoice /
Debit or Credit Note / Supplementary Invoice issued
by a supplier registered under GST Act.
2. The said goods/services have been received.
3. Returns (Form GSTR-3) have been filed.
4. The tax charged has been paid to the government
by the supplier.
11:20 AM 25

2021
Provisional
ITC
(Indirect Tax)
Classroom
Deliberations

Rule 36 (4) on provisional ITC in Form GSTR-3B
• As per the sub-rule (4) inserted in rule 36 of the
Central Goods and Service Tax Rules, 2017, a
taxpayer filing GSTR-3B can claim provisional
Input Tax Credit (ITC) only to the extent of 5% of
the eligible credit available in GSTR-2B (earlier,
GSTR-2A was considered).

Electronic Ledgers
• Amount deposited in cash credited
• may be used for making payments
towards tax, interest, penalty, fees
or any amount
• Balance after payment may be
refunded
Electrical
Cash
Ledger
• Input tax credit shall be credited
here
• May be used for making payment
towards tax payable
• Balance may refunded only in case
of experts / rate of output is less
than input
Electronic
Credit
Ledger

How GST Works
• GST works on a self-monitoring mechanism,
which is matching the concept of invoice
between supplier and recipient of goods and
services.
• Only after matching of invoices and payment
of tax by the supplier, the input tax credit will
be available to the recipient.

ITC : Max 105% of GSTR 2A
ITC on invoices / debit notes which
havebeen uploaded by the
suppliers intheirGTSR-1s
ITC on invoice/debit note
which have notbeen
uploaded
by the suppliers intheirGTSR-1s
100% ITC can be claimed on
such invoices/debit notes, if
all other conditions of
availing ITC are fulfilled
5% of the eligible ITC
available on
Invoices / debit notes
uploaded by suppliers in
their GSTR-1s can be claimed
on such invoices/debit notes.
ITC claimed should not exceed 105% of ITCreflecting in GSTR-2A on the due
date of filing of GSTR-1 of the suppliers for the said tax period.

Example
Amount of ITC
involved in the
invoices (Rs.)
Amount of ITC that
can beavailed (Rs.)
85 invoices uploaded in
GSTR-1
9.5 lakh 9.5 lakh
[Refer Note 1]
15 invoices not uploaded inGSTR-1 0.45 lakh 0.45 lakh
[Refer Note 2]
Total 10 lakh 9.95 lakh
Notes:
(1) 100% ITC can be availed on invoices uploaded by the suppliers in their GSTR-1.
(2) As per rule 36(4), the ITC in respect of invoices not uploaded by the suppliers in
their GSTR-1s is restricted to 5% of eligible ITC in respect of invoices uploaded in
GSTR-1s. 5% of the eligible ITC in respect of invoices uploaded in GSTR-1s [Rs.0.
475 lakh (5% of Rs. 9.5 lakh)] . ITC availed should be limited to Rs.0.475 Lakh. As
ITC involved is Rs.0.45 Lakh the entre ITC is allowed.

GST Returns
Return form Who should file the return and what should be filed? The due date for filing returns
GSTR-1
The registered taxable supplier should file details of outward supplies of taxable goods and
services as affected.
11th of the subsequent month for more than 1.5
Crores (Turnover) & Last Day of the Succeeding
month for turnover up to 1.5 Crores
GSTR-2
The registered taxable recipient should file details of inward supplies of taxable goods and
services claiming the input tax credit (Currently Filing facility of GSTR-2 is not available on
the portal)
15th of the subsequent month.
GSTR-3B
The registered taxable person should file the monthly return on the basis of finalization of
Summarized details of outward supplies & inward supplies plus the payment of an amount
of tax.
20th of the subsequent month.
GSTR-4 (CMP
08)
Composition supplier should file the quarterly return for depositing payment 18th of the month succeeding quarter
GSTR-5 Return for the non-resident taxable foreign taxpayer 20th of the subsequent month
GSTR-5A Return for the OIDAR 20th of the subsequent month
GSTR-6 Return for input service distributor 13th of the subsequent month
GSTR-7 Return for authorities carrying out tax deduction at source 10th of the subsequent month
GSTR-8
E-commerce operator or tax collector should file details of supplies effected and the
amount of tax collected
10th of the subsequent month
GSTR-9 The registered regular taxpayer should file an annual return 31st December of the next fiscal year
GSTR-9A The composition traders should file an annual return 31st December of the next fiscal year
GSTR-9C Turnover Above 2 crores (Regular Taxpayers) in a Particular FY 31st December of the next fiscal year
GSTR-10
The taxable person whose registration has been cancelled or surrendered should file the
final return
Within 3 months of the date of cancellation or date
of cancellation order, whichever is later

How it works
• Once Form GSTR-1 (Outward supply details) is filed by the supplier,
recipient has a visibility of the purchase through the auto populated
Form GSTR-2A (Inward supplies details).
• After necessary modification, additions (if any) and acceptance in Form
GSTR 2, the Input credit will be credited to the recipient's electronic
credit ledger on a provisional basis.
• The addition and modification done by the recipient in Form GSTR-2 will
be made available to supplier in Form GSTR- 1A for his acceptance.
• Input credit will be available only when the Monthly returns (Form
GSTR-3) are filed by the supplier along with payment tax.
• The final acceptance of Input Tax credit will be communicated in Form
GST MIS-1.
11:20 AM 33

Provisional ITC
Sl Particulars Case -I
Amount (Rs.)
Case-II
(Amount (Rs.)
1 Eligible ITC as per Books of Accounts 1,00,000 62,000
2 Eligible ITC available in the GSTR-2B 60,000 60,000
3 ITC that can be claimed as the provisional credit
(5% of 2)
3,000 3,000
4 Total ITC that can be claimed in the GSTR-3B
(2+3)
63,000 62,000
5 ITC not allowed in the GSTR-3B of August 2021
(1-4)
37,000 0
?
?
?
?
?
?

Example
• A car manufacturer purchased 30 tons of steel from Steel supplier . Steel supplier
supplied steel and issued tax invoice on 5th July with GST of Rs. 2, 40,000.
• Let us examine the process to understand the flow of availing input credit:
1. On 5th July, car manufacturer satisfy the condition of Receiving Goods and Tax
Invoice.
2. On 10th August, Steel supplier furnishes outward supply through Form GSTR-1
Return.
3. From 11th August, car manufacturer has visibility of their purchase through auto-
populated Form GSTR-2A.
4. From 11th to 15th August, car manufacturer can make additions or modifications,
if any. In this example, it is assumed that there are no additions or modifications
and car manufacturer . submits the Form GSTR-2.
5. Now, ITC of Rs. 2,40,000 is credited to car manufacturer on a provisional basis.
6. Once the Form GSTR-3 (Monthly Return) along with tax payment is remitted by
Steel supplier, car manufacturer is eligible for ITC of Rs. 2,40,000.
7. The final acceptance of ITC will be communicated in Form GST MIS-1.
11:20 AM 35

Electronic Ledgers
• E-Ledger is an electronic form of passbook for GST.
• These e-ledgers are available to all GST registrants on the GST Portal.
• The e-ledgers contains details of the following:
A. Electronic Cash Ledger
• Amount of GST deposited in cash to government in Electronic Cash
Ledger.
• This is like an e-wallet.
• GST payments made in cash or through bank are reflected in Electronic
Cash Ledger.
• After deduction of Input Tax Credit (ITC) any balance tax liability has to be
paid using balance in Electronic Cash Ledger.
B. Electronic Credit Ledger
• Balance of Input Tax Credit (ITC) is available in Electronic Credit Ledger .
• Eligible Input Tax Credits are reflected in Electronic Cash Ledger.
• Credit in Electronic Credit Ledger can be used only for payment of tax.
• This means that balance of Electronic Credit Ledger cannot be utilised for
payment of interest, penalty or late fees.

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