GST E-Ledgers, Decoded: A Walk Through Rules 85, 86 & 87

The Goods and Services Tax (GST) regime ushered in a new era of digital compliance, one where the government and taxpayers operate through seamlessly integrated online systems. At the heart of this ecosystem are the three electronic ledgers (e-ledgers) maintained on the GST portal for every registered taxpayer:

1.Electronic Liability Register,

2.Electronic Credit Ledger, and

3.Electronic Cash Ledger.

These ledgers are not merely digital books—they are the statutory backbone for recording every taxpayer's liabilities, input tax credits (ITC), and payments. The functioning of these ledgers is governed by Rules 85, 86, and 87 of the Central Goods and Services Tax (CGST) Rules, 2017.

Section 49 of the CGST Act provides the foundational legal framework on how tax, interest, penalty, and other dues are to be paid and adjusted through these ledgers. While we won't delve into Section 49 in detail here, it's important to know that it outlines key principles such as:

• Payments credited first to Electronic Cash Ledger.

• ITC credited to Electronic Credit Ledger upon return filing.

• ITC usage restrictions: only for output tax, not penalties/interest.

• Payment priority: past liabilities → current liabilities → demands (Secs 73, 74, 74A).

• Inter-head and inter-GSTIN cash transfers allowed under conditions.

• Government can limit ITC usage for paying output tax liabilities.

Together, these provisions make the three e-ledgers a tightly integrated system ensuring clear, accurate, and transparent management of GST payments and credits. In the following sections, we will explore Rules 85, 86, and 87 in detail to understand the specific functions and interplay of each ledger.

Rule 85 – Electronic Liability Register: Your GST “Payables” Ledger

What it is:

A digital register (in FORM GST PMT-01) that keeps track of all your dues under GST—tax, interest, penalties, fees, and more.

Who maintains it:

Every registered person liable to pay any amount under GST will have this register on the common portal.

Structure of the Liability Register

• The register is divided into two parts for clarity:

• Part–I: Return-related liabilities (e.g., tax declared in GSTR-3B)

• Part–II: Other liabilities (e.g., dues from audit, assessment, or demand notices)

• Every time a liability is created, it appears as a debit entry. Once the liability is discharged or reduced using ITC or cash, a corresponding credit entry is made.

This basic debit-credit flow helps track outstanding vs. cleared dues in real time.

What Debits and Credits to This Register

What Happens When There's a Legal Order?

• If you win a partial/full relief in appeal or court, your liability register is reduced i.e. credited accordingly.

• If you settle the SCN/demand by paying tax + interest + penalty, the liability gets wiped out or reduced, and the liability register is updated.

Discrepancies? There's a Fix

• If you find errors in your liability register, you can notify the jurisdictional officer via FORM GST PMT-04.

Rule 86 – Electronic Credit Ledger: Your ITC Wallet

What is it?

The Electronic Credit Ledger is like your ITC wallet on the GST portal (maintained in FORM GST PMT02) where all eligible input tax credits get credited and are used for paying tax liabilities. Debit-Credit Rule

When Does the Credit Ledger Get Credited?

When Does the Credit Ledger Get Debited?

Legal Basis of Debit: Sections 49, 49A & 49B

• Section 49: You may use the amount in the credit ledger to pay off GST liabilities.

• Section 49A: Before using CGST or SGST/UTGST credit, you must first fully use your IGST credit.

• Section 49B: The Government can prescribe how and in what order ITC can be used, based on GST Council recommendations.

How ITC Must Be Utilised – Rule 88A

Other Points to Remember

• No manual entries can be made in the credit ledger, except as permitted (e.g., by the proper officer through refund orders).

• If you notice a mismatch or issue in your credit ledger, report it via FORM GST PMT-04.

• As clarified in the explanation to Rule 86, a refund is deemed rejected when your appeal is finally dismissed or you submit a declaration not to pursue an appeal.

Rule 87- Electronic Cash Ledger: Your GST Wallet

Just like you'd keep a wallet for payments, the Electronic Cash Ledger (ECL) is your online GST wallet — maintained on the GST portal for every taxpayer. This ledger is auto-maintained in FORM GST PMT-05 and shows all your cash deposits and how they're used to pay off your tax dues.

How It Works

1. Deposit First, Pay Later

Before making any GST payment, you must first deposit funds into your Electronic Cash Ledger. To do this:

• Generate a challan in FORM GST PMT-06.

• The challan is valid for 15 days.

2. Payment Modes

You can fund your ledger using:

• Internet banking through authorised banks

• UPI or IMPS from any bank

• Credit/Debit cards through authorised banks

• NEFT/RTGS from any bank

• Over the Counter (OTC) payment (cash/cheque/DD) through authorised banks — but only up to Rs.10,000 per challan per tax period.

☞International suppliers of online services or online gaming can also deposit via the SWIFT network once enabled by the CBIC.

3.Temporary Users Welcome

Even if you're not registered under GST and required to make payment, you can do so using a Temporary ID generated on the portal.

4.What Happens After Payment?

• As soon as your payment reaches the government's account in an authorised bank, a Challan Identification Number (CIN) is generated.

• This CIN ensures that the amount gets credited to your Electronic Cash Ledger (FORM GST PMT-05).

• The GST portal then automatically issues a receipt confirming the credit.

• However, if your bank debits your account but does not generate a CIN, or generates the CIN but fails to communicate it to the common portal, you can raise an electronic representation through FORM GST PMT-07 on the common portal. This representation is made to the bank or electronic payment gateway through which the deposit was initiated.

• Additionally, in cases where the bank does not communicate CIN details to the portal, the E-Cash Ledger may still be updated based on the e-Scroll of the Reserve Bank of India (RBI). This is possible only when the details in the RBI e-Scroll match the challan details generated in FORM GST PMT-06 on the GST common portal.

Adjustments and Transfers

• Any TDS (under Section 51) or TCS (under Section 52) credited to your account will also reflect in your Cash Ledger.

• If you claim a refund, the amount is debited from your Cash Ledger.

• If the refund is rejected, the amount is re-credited through an order in FORM GST PMT-03.

Discrepancies? Raise a Flag

If you spot any error in your ECL, report it in FORM GST PMT-04 via the portal.

Move Funds with PMT-09

You can shift funds within your Electronic Cash Ledger using FORM GST PMT-09:

• From one tax head to another (e.g., from CGST to IGST)

• Even to another GSTIN belonging to the same legal entity i.e. distinct person (as per Section 25(4)/(5))

Caveat: Transfers aren't allowed if you have any unpaid GST liabilities.

Interplay of the Three Ledgers: The Full Picture

Let's understand how these ledgers work together:

1. Taxpayer files GSTR-3B → liability is posted in the E-Liability Ledger

2. Taxpayer uses ITC → debits E-Credit Ledger

3. Remaining dues not covered by ITC→ paid via E-Cash Ledger

Once the liability is fully settled—whether through ITC, cash, or a combination of both—all three ledgers update accordingly. This seamless coordination ensures complete transparency and helps you keep track of your tax payments at every step.

Common Issues Faced by Taxpayers

• ITC mismatch: When supplier does not file returns, ITC doesn't reflect in GSTR-2B.

• Wrong challan head: Depositing under IGST instead of CGST, or vice versa, may require a refund and re-deposit.

• Credit blocked under Rule 86A: Can impact working capital significantly.

• Cash Balance Frozen: Sometimes refund claims or investigations may result in restrictions.

Dos and Don'ts for GST Ledgers

Conclusion: Monitor, Reconcile, Comply

Electronic ledgers under GST aren't just digital records—they're compliance lifelines. Mismanagement or inattention can lead to interest, penalties, and unnecessary business disruptions.

Regular monitoring, timely reconciliations, and keeping an eye on supplier compliance are essential to ensure smooth operations.

Understanding how the Electronic Credit, Cash, and Liability Ledgers function empowers taxpayers to plan better, stay compliant, and steer clear of avoidable pitfalls.

Disclaimer: The information given in this article is solely for purpose of understanding the law. It is completely based on the interpretation of the author and cannot be constituted as a legal advise, the author of this article and Lawcrux team is not responsible for any legal issues if arises on the basis of the interpretation given above.