Every GST liability ends in the same place: the electronic ledgers on the GST portal. This chapter decides how much of a month’s tax can be paid from credit, how much must go in cash, and what a late payment costs. It is also where many computation questions are won or lost, because the order of using credit is fixed by law.
The three electronic ledgers
| Ledger | What goes in | What it can pay |
|---|---|---|
| Electronic cash ledger | Cash deposited through challan PMT-06, plus TDS and TCS credited to the supplier | Tax, interest, penalty, fees and other amounts |
| Electronic credit ledger | Input tax credit taken in returns | Output tax only, not reverse charge tax, interest, penalty or fees |
| Electronic liability register | All liabilities: tax per return, interest, penalties, demands | Shows what is due and what has been paid |
A few points on the cash ledger: the PMT-06 challan is valid for 15 days; the date of deposit is the date the amount is credited to the Government account; and amounts can be transferred between tax heads, and to a distinct person under the same PAN.
Order of using input tax credit (section 49 and rule 88A)
| Credit of | Use first against | Then against | Never against |
|---|---|---|---|
| IGST | IGST | CGST and SGST/UTGST, in any order and proportion | Nothing excluded |
| CGST | CGST | IGST | SGST/UTGST |
| SGST/UTGST | SGST/UTGST | IGST | CGST |
Two rules sit on top of the table. IGST credit must be used up completely before any CGST or SGST credit is used, for any tax (section 49A and rule 88A). And there is no cross-use between CGST and SGST credit.
From practice
The freedom to split leftover IGST credit between CGST and SGST is worth real cash. Take a month with output tax of IGST ₹10,000, CGST ₹4,000 and SGST ₹4,000, and credit of IGST ₹12,000, CGST ₹1,000 and SGST ₹4,000.
- If the leftover IGST credit of ₹2,000 is used against SGST, SGST is fully paid with ₹2,000 of SGST credit to spare, but that spare credit cannot pay CGST. CGST needs ₹3,000 in cash.
- If the leftover ₹2,000 is used against CGST instead, CGST needs only ₹1,000 in cash, and the SGST credit pays SGST in full.
Same credits, same liability: ₹1,000 in cash instead of ₹3,000. Tax teams plan this split every month before filing GSTR-3B.
Order of discharging liabilities (section 49(8))
Payments go first to self-assessed tax and other dues for earlier tax periods, then to the current period, then to any demand raised by the department.
Interest under section 50
- Late payment of tax: interest at 18% a year, from the day after the due date until the date of payment.
- Late return, net cash only: when a return is filed late, interest is charged only on the part of the tax paid in cash, except where the return is filed after proceedings under section 73 or 74 have started.
- Credit wrongly availed and used: interest at 18% from the date of use until reversal or payment (section 50(3) and rule 88B). Credit counts as used only when the credit ledger balance falls below the wrongly availed amount.
ICAI’s illustration: a GSTR-3B for January due on 20 February is filed on 15 April, with net cash tax of ₹36,500 paid on 15 April. The delay is 21 February to 15 April, 54 days. Interest = ₹36,500 × 18% × 54/365 = ₹972.
Quick check
Why
Input tax credit can be used only to pay output tax. Reverse charge tax, interest, penalty and late fees must be paid from the electronic cash ledger.
Quick check
Why
CGST credit is used first for CGST and then for IGST. It can never be used for SGST or UTGST, and credit cannot pay interest or fees.
Exam lens
Show the set-off as a ledger-wise table with columns for IGST, CGST and SGST: liability, credit used (with source), and cash payable. It is faster to write and easier for the examiner to mark than paragraphs.
Frequently asked questions
Can reverse charge tax be paid from input tax credit?
No. Tax payable under reverse charge must be paid from the electronic cash ledger.
In what order is IGST credit used?
First against IGST, then against CGST and SGST or UTGST in any order and proportion. The whole IGST credit must be used up before any CGST or SGST credit is used.
What is the rate of interest on late payment of GST?
18% a year under section 50(1). When a return is filed late, interest is charged on the tax paid in cash.
Related reading
- Input tax credit conditions under section 16
- TDS and TCS under GST: sections 51 and 52
- GST return due dates on one page
Free for the May 2027 batch
Learn GST the way it is applied at work
CA Inter GST (Paper 3, Section B) by CA Vivek Kumar: short lectures in Hinglish, a concept-check MCQ after every concept, study notes, revision notes and past-paper practice for every chapter.
Note
Based on Chapter 13 (Payment of Tax) of the ICAI BoS Study Material, Intermediate Paper 3 Section B, for May 2027, September 2027 and January 2028 (law as amended up to 30.04.2026). Last reviewed 15 October 2026. The set-off example uses illustrative figures.