Electronic Credit Ledger- A Detailed Discussion

There are two important ledgers under GST, the first one is Electronic Cash Ledger and the second is Electronic Credit Ledger. The electronic credit ledger shall be maintained in FORM GST PMT-02 for each registered person eligible for input tax credit under the Act on the common portal and every claim of input tax credit under the Act shall be credited to the said ledger. In other words, all the credit accrued on an account of purchases made by the taxpayer are accumulated in the electronic credit ledger. The balance in electronic credit ledger can be viewed any time by logging into the GST portal. In this article we are going to discuss about the utilisation of the balance available in electronic credit ledger and some other important points related to electronic credit ledger.

Usage of amount available in electronic credit ledger:
1. Sub section 4 of section 49 states that the amount available in the electronic credit ledger may be used for making any payment towards output tax under this Act or under the IGST Act. Thus the amount available in credit ledger can be used towards payment of output tax liability.

2. The another use of amount available in electronic credit ledger can be used for depositing the amount of pre deposit while filing an appeal.

3. Further, if taxpayer wants to pay any amount through DRC-03 then also the amount available in electronic credit ledger can be used.

Order of Utilisation of amount available in electronic credit ledger:
For payment of output tax liability the amount available in electronic credit ledger would be utilised in the following manner:

(a) IGST credit shall first be utilised towards payment of IGST liability and the amount remaining, if any, may be utilised towards the payment of CGST & SGST in that order.

(b) CGST credit shall first be utilised towards payment of CGST liability and the amount remaining, if any, may be utilised towards the payment of IGST.

(c) SGST credit shall first be utilised towards payment of SGST liability and the amount remaining, if any, may be utilised towards payment of IGST.

It is important to note that the ITC of SGST would be utilised towards payment of IGST only when the balance of ITC on an account of CGST is not available for payment of integrated tax.

Further, the CGST credit shall not be utilised towards payment of liability under SGST. Similarly, the SGST credit shall not be utilised towards payment of CGST.

How the taxpayer can view their Electronic Credit Ledger on GST Portal:
Taxpayers can view their Electronic Credit Ledger by logging on to the GST Portal. The Path to view the electronic credit ledger is: Services > Ledgers > Electronic Credit Ledger.

Restrictions on use of amount available in electronic credit ledger:
Rule 86B of CGST Rules 2017 imposes a restrictions on the usage of amount available in the credit ledger. As per rule 86B, if the value of taxable supply other than exempt supply and zero-rated supply, in a month exceeds Rs. 50 lakhs, then in such situation the amount available in electronic credit ledger shall not be used to discharge the liability towards output tax in excess of 99% of such tax liability.  In other words 1% of tax liability would be payable in cash even though the amount is available in the credit ledger.

Let us understand the implication of Rule 86B of CGST Rules 2017 with the help of an example:
Suppose a registered person Mr. A has taxable value of supply in the month of March is Rs. 80 lakhs on  which the applicable rate of tax is 18%. Hence the total tax liability would be Rs.14,40,000/- and now suppose the balance available in the credit ledger of Mr.A is Rs. 20,00,000/-. In such situation due to applicability of Rule 86B, while filing GSTR-3B of March, Mr. A can utilise ITC available in his credit ledger only upto to 99% and has to pay 1% of tax liability i.e., 1% of 14,40,000 Rs. 14,400/- in cash. Otherwise there would be a violation of Rule 86B.

However, Rule 86B also contains some exceptions as mentioned above. So, let us summarised those exceptions. The rule 86B would not be apply where;

(i) The taxpayer or the proprietor or karta or managing director or any of its two partners, whole-time directors have paid income tax in each of the last two financial years more than Rs. 1,00,000; or

(ii) In last year the taxpayer has claimed the refund of unutilised ITC due to export done on LUT basis & amount of such refund exceeds Rs. 1,00,000; or

(iii) In last year the taxpayer has claimed the refund of unutilised ITC due to inverted duty structure & amount of such refund exceeds Rs. 1,00,000; or

(iv) the registered person has paid the GST in cash for an amount which is in excess of 1% of the total output tax liability; or

(v) the registered person is a Government Department, PSU, local authority, statutory body.

No interest if the amount is not utilised from electronic credit ledger:
Sub section 3 of section 50 of CGST Act 2017 states that where any ITC has been wrongly availed and utilised, the registered person shall pay interest on such input tax credit wrongly availed and utilised.

Thus as per section 50(3) it is clear that where any amount available in electronic credit ledger has been wrongly availed and utilised, only then interest would be applicable. However, if any ITC which has been wrongly availed but not utilised, in such situation interest would not be applicable since the ITC is not utilised.

Calculation of Interest if ITC is wrongly availed and utilised:
Sub rule 3 of Rule 88B states that in case, where interest is payable on the amount of ITC wrongly availed and utilised in accordance with section 50(3), the interest shall be calculated on the amount of ITC wrongly availed and utilised, for the period starting from the date of Utilisation of such wrongly availed ITC till the date of reversal of such credit.

Further as per explanation contained in said sub rule 3 of rule 88B, the ITC wrongly availed shall be construed to have been utilised, when the balance in the electronic credit ledger falls below the amount of ITC wrongly availed, and the extent of such Utilisation of input tax credit shall be the amount by which the balance in the electronic credit ledger falls below the amount of ITC wrongly availed.

For the calculation of interest in case of wrong availment of IGST credit, one common doubt that was commonly arise is that whether the balance of ITC in electronic credit ledger under the head of IGST only needs to be considered or total ITC available in electronic credit ledger, under the heads of IGST, CGST and SGST taken together, has to be considered.

In this respect it is important to know that since the amount of ITC available in electronic credit ledger under any of the heads of IGST, CGST or SGST can be utilized for payment of liability of IGST. Hence the total ITC available in electronic credit ledger under the heads of IGST, CGST and SGST taken together to check whether such IGST credit is utilised or not.

For example: If suppose Mr. X has wrongly availed the ITC of IGST of Rs. 1,00,000/- in the month of May 2024. Now, in the month of October 2024 Mr. X wants to reverse such wrongly availed ITC. For the purpose of checking whether such IGST credit is utilised or not, we have to check the balance of electronic credit ledger of Mr. X from May 2024 to October 2024, if in any month the total amount of credit ledger does not fall below Rs. 1,00,000/- no interest would be payable. Let suppose if the amount available in credit ledger under head CGST is Rs. 45,000 & SGST Rs. 45,000 and IGST Rs. 20,000/- in such situation even though the balance available in credit ledger of IGST is only 20,000/- but the total balance of credit ledger is 1,10,000/- which is more than the credit wrongly availed i.e., 1,00,000/- hence in such situation there would be no need to pay interest.

The same was also clarified by the CBIC vide Circular No. 192/04/2023-GST dt.17.07.2023 that in cases where IGST credit has been wrongly availed and subsequently reversed on a certain date, there will not be any interest liability under sub-section (3) of section 50 of CGST Act if, during the time period starting from such availment and up to such reversal, the balance of input tax credit (ITC) in the electronic credit ledger, under the heads of IGST, CGST and SGST taken together, has never fallen below the amount of such wrongly availed ITC, even if available balance of IGST credit in electronic credit ledger individually falls below the amount of such wrongly availed IGST credit. However, when the balance of ITC, under the heads of IGST, CGST and SGST of electronic credit ledger taken together, falls below such wrongly availed amount of IGST credit, then it will amount to the utilization of such wrongly availed IGST credit and the extent of utilization will be the extent to which the total balance in electronic credit ledger under heads of IGST, CGST and SGST taken together falls below such amount of wrongly availed IGST credit, and will attract interest as per sub-section (3) of section 50 of CGST Act.

Refund of amount available in electronic credit ledger:
Some times the situation arises where the amount available in electronic credit ledger can’t be fully utilised by the taxpayer towards payment of output tax liability and the balance of electronic credit ledger accumulated over the period. In such situation, one common doubt arise here is whether the refund can be claimed of such balance? In this respect it is important to know that as per the first proviso to section 54(3) of CGST Act 2017 the refund of unutilised input tax credit shall be allowed only in the following two cases;
(i) Zero rated supplies made without payment of tax or
(ii) Inverted duty tax structure i.e., where the credit has accumulated on account of rate of tax on inputs being higher than the rate of tax on output supplies (other than nil rated or fully exempt supplies).

The refund of accumulated ITC due to zero rated supplies made without payment of tax shall be calculated as per the formula prescribed under Rule 89(4) of CGST Rules 2017. On other hand the refund of accumulated ITC due to inverted duty tax structure shall be calculated as per the formula prescribed under Rule 89(5) of CGST Rules 2017.

Some other points in respect of electronic credit ledger:

1. An Electronic Credit Ledger can be viewed only by the taxpayers themselves. In other words, one taxpayer can’t view the Electronic Credit Ledger of another taxpayer. 

2. The taxpayer can’t make debit entry in advance for the future liability in the Electronic Credit Ledger. In other word the electronic credit ledger can be debited only against an existing tax liability.

3. The taxpayer can download the electronic credit ledger and save the credit ledger in their local computer.

4. Credit availed on CESS will be available for setoff against any output tax liability of CESS only. There is no Inter head adjustment for CESS Input Tax Credit.

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.