Electronic Credit Ledger in GST - Availment and Utilization under GST Law

When it comes to practical implementation, the GST portal consists of three pillars that provide a snapshot of the transactions undertaken on the GST portal. These are the electronic ledgers of GST which include:

• Electronic Credit Ledger
• Electronic Cash Ledger
• Electronic Liability Register

In this guide, we will be discussing the meaning of electronic credit ledger in GST and how it functions.

What is Electronic Credit Ledger in GST?

Form GST PMT-02 is the electronic credit ledger in GST that displays the credit availed, utilised and the balance lying in the registered person’s account for the selected period. You can check your electronic credit ledger in GST by following the below steps

Login to your GST Portal >> Click on ‘Services’ tab >> Select ‘Ledgers’ >> Select ‘Electronic credit ledger’

A dashboard will appear showing the ‘Financial Year’, ‘Current Month’ and the ‘ITC balance’ as on the date on which you have opened your electronic credit ledger. It will provide three options viz.

• Electronic Credit Ledger
• Provisional Credit Balance
• Blocked Credit Balance

The credit availed of by the registered person through the filing of return is credited in the electronic credit ledger in GST. This credit can be used to either set off against IGST, CGST, or SGST or to avail of a refund if it satisfies the prescribed conditions. The provisional credit balance shows the balance of provisional and mismatch credit while the blocked credit balance shows the amount of ITC blocked.

The amount utilised or availed of as a refund is debited from the electronic credit ledger. If the electronic credit ledger refund is rejected, the amount is re-credited back to the ledger through an order made in Form GST PMT-03. Also, if the amount has been wrongly paid as tax or the tax has been paid in excess by debiting the electronic credit ledger, then the same can be recredited by an order passed by the proper officer in Form GST PMT-03. 

How to Use Balance in Electronic Credit Ledger? – Method of Utilising Income Tax Credit

GST Law has sequenced the utilisation of credit from the electronic credit ledger in GST. However, contradictory provisions have been stated by the act and the rules thereunder.

1)    As per Section 49(5) of the CGST Act, 2017-

• IGST credit shall be utilised firstly towards payment of integrated tax liability and then towards CGST and SGST / UTGST liability in ‘that order’.
• CGST credit shall be utilised firstly towards payment of CGST liability and then towards IGST liability
• SGST / UTGST credit shall be utilised firstly towards payment of SGST / UTGST liability and then towards IGST liability. However, SGST / UTGST credit shall be utilised towards payment of IGST credit only when the CGST credit is not available for paying IGST liability.
• CGST credit cannot be utilised for payment of SGST / UTGST liability and vice-versa.

2)    Section 49A provides that the IGST credit shall be fully exhausted before utilising CGST and SGST credit.

3)    As per Rule 88A of the CGST Rules, 2017-

• IGST credit shall be utilised towards payment of IGST liability and the remaining credit can be utilised towards payment of CGST and SGST / UTGST in ‘any order’.
• CGST credit or SGST / UTGST credit can be utilised towards payment of IGST, CGST or SGST liability only after the entire IGST credit has been utilised. This implies that firstly, IGST credit shall be utilised fully before using CGST and SGST / UTGST credit.

Practical Analysis

There are contradictory positions as stated by Section 49(5) and Rule 88A. Practically speaking, the GST portal requires IGST credit to be fully utilised before utilising CGST and SGST credit. However, after payment of IGST liability, the remaining IGST credit is allowed to be utilised against CGST and SGST liability in any order. This was also clarified in Circular No. 98/17/2019-GST Dated 23rd April 2019.

Further, as per Rule 86B, for registered persons whose value of taxable supply, excluding exempt and zero-rated supply, exceeds Rs. 50 lakhs in a month, then only 99% of the output tax liability can be discharged using the electronic credit ledger (i.e., through the utilisation of ITC). The remaining 1% shall be discharged using the electronic cash ledger.

When Can ITC be Blocked in Electronic Credit Ledger?

The Commissioner or any of his authorised officers can block the ITC available in the electronic credit ledger in case he has reasons to believe that such input tax credit has been fraudulently availed or is ineligible because:

• The tax invoices or debit notes were issued by a non-existent person or a person who is not conducting any business from any place for which the registration was obtained or,
• The tax invoices or debit notes were issued while the goods or services were not actually received or,
• The tax in respect of such supply was not paid to the government or,
• The recipient of the supply is found to be non-existent or not conducting any business from any place for which the registration has been obtained or,
• The ITC has been availed where the registered person is not having any tax invoice or debit note. 

However, if the commissioner or authorised officer is satisfied that the above conditions no longer exist, then he may allow debit of the electronic credit ledger for utilising against payment of tax or refund of ITC. The above restrictions shall automatically cease to expire within 1 year from the date on which they were imposed.

 Above was the comprehensive coverage about electronic credit ledger in GST. In case of any query, please feel free to contact the ASC Group.

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