An overview of taxpayer ledgers under Goods and Service Tax

As per the Draft GST model law and the process documents issued by the Department of revenue. There is a reference of three ledgers that are electronic cash ledger, electronic credit ledger and tax liability ledger.

These 3 ledgers will be maintained for all the taxpayers and can be collectively known as Taxpayer ledgers, which are as follows:

• Cash ledger
• Input Tax Credit ledger
• Tax liability ledger

The above three ledgers are explained below in details:

Electronic cash ledger: All the payments deposited via challan under the minor head Tax, Interest, Penalty, Fees and others of the respective Major head like CGST, SGST and IGST shall be credit under the electronic cash ledger of the taxpayer. Any utilization of the available credit towards payment w.r.to liability arising out of the return or any other demand will be debited to such cash ledger.

Note: The cash ledger will display balance as on date under various major-minor head combination will CGST Tax, CGST Interest, CGST penalty etc. which will be 15 in count (3 Major heads* 5 Minor heads = 15 Major-Minor heads columns)

Electronic Input tax credit ledger: All the input taxes under various major heads i.e. CGST, SGST and IGST shall be credited to electronic ledger also known as Input tax credit or ITC ledger in the following situations: (All or any of them will form part of ITC ledger)

• ITC for taxes paid on Inward supplies from registered taxpayers  
• ITC available to unit based on the distribution of credit done by the ISD as per manner prescribed in section 19 of the Draft law
• Permissible ITC on inputs held in stock and inputs contained in semi-finished or finished goods held in stock on the day immediately preceding the date from which the taxpayer becomes liable to pay tax, provided he applies for registration within 30 days from the date of its liability
• 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 compounding taxpayer to normal taxpayer  
• ITC w.r.to taxes paid under reverse charge shall be credited to the Electronic credit ledger also known as Input tax credit ledger of the Taxpayer.

Other important points: (As per Draft model Law)

• If the goods and/or services are used by the registered taxable person partly for the purpose of his business and partly for any other purposes, the amount of credit shall be allowed for the goods and/or services used for the purpose of his business.
• If the goods and / or services are used by the registered taxable person partly for effecting taxable supplies and partly for effecting non-taxable supplies which are exempt and not zero-rated, the amount of credit shall be restricted to so much of the input tax as is attributable to the taxable supplies including zero-rated supplies.
• In cases of change in the constitution of business of the registered taxable person on account of sale, merger, demerger, amalgamation, lease or transfer of the business with the specific provision for transfer of liabilities, the said registered taxable person shall be allowed to transfer the input tax credit that remains unutilized in its books of accounts to such sold, merged, demerged, amalgamated, leased or transferred business in the manner prescribed.
• Input tax credit shall be available on provisional basis even when the supplier has not paid tax for a particular tax invoice.

Debit in Input tax credit ledger

Any utilization of the available credit for the following purposes shall lead to debit entry to the ITC ledger:

• Utilization towards liability arising out of the return
• Utilization against any demand notice received based on assessment
• Credit reversal due to Mismatch of input tax credit
• Lapse of input tax credit after expiry of one year from the date of issue of tax invoice relating to the inward supply

Note: Input tax credit ledger shall display the balance under respective Major head like CGST, SGST and IGST.

Tax liability ledger shall also be electronically maintained which will display the amount of liability arising out the regular return of the taxpayer or any other liability arising out of demand notice, penalty etc. and shall also display the amount of liability paid by utilization of the available credit balance in Cash ledger or Input tax credit ledger.

Manner of utilization of credit balance available as per Cash ledger

All the payments deposited via challan under the minor head Tax, Interest, Penalty, Fees and others of the respective Major head like CGST, SGST and IGST shall be credit under the electronic cash ledger of the taxpayer which can be utilized only with respect to the same category of liability of tax, i.e. Liability of CGST Tax can only be paid from the Credit balance of CSGT Tax in cash ledger, which means no cross adjustments of the available credit balance w.r.to liability under other major heads shall be allowed. However, whether cross adjustments of minor heads under particular major head will be allowed or not is still not clear, i.e. whether CGST Tax liability can be paid from CGST Interest if balance available under CGST Tax is less. Apparently it seems that there won’t be any cross adjustments w.r.to minor heads under particular major head shall be allowed but the rules will clarify in this regards.  

Manner of utilization of Input Tax Credit in ITC ledger

As per the business process document and the draft GST law there shall be a mechanism of utilization of input tax credit based on some pre-defined rules.

• IGST credit in ITC ledger to be utilized first for the payment of IGST liability and the balance of IGST credit left, if any shall be utilized for the payment of the CSGT and/or SGST liability
• CGST credit in ITC ledger to be utilized first for the payment of CGST liability and the balance of CGST credit left, if any shall be utilized for the payment of the IGST liability
• SGST credit in ITC ledger to be utilized first for the payment of SGST liability and the balance of SGST credit left, if any shall be utilized for the payment of the CSGT and/or SGST liability
• There shall not be any cross utilization of the CGST credit for paying SGST liability and vice versa.
• The Input tax credit arising out of current period tax return shall first be utilized for the payment of current period return tax liability and the balance left if any shall be utilized for the payment of any other tax liability.

Note:

Please refer Section 2(6) , Section 8 and Section 147 of the Draft GST law for more clarity on the provisions, the article has been prepared based on the understanding of the Draft Model GST law released by the Department of Revenue on 14th June’2016 and Process document of Registration issued in October, 2015.

The author can also be reached out at: mayankwadhera@gmail.com