/ GST

FAQ on GST Electronic Ledger System under GST

cbic

Recent CBIC Updates on GST Electronic Cash Ledger- Payment Mechanism under GST Regime

Electronic Credit Ledger is blocked due to Input Tax Credit denial : The Madras High Court recently addressed a significant issue regarding the pre-deposit requirements when a taxpayer’s access to the Electronic Credit Ledger is blocked due to Input Tax Credit (ITC) denial. Here are the key points from the court’s ruling:

Issue: Access to the Electronic Credit Ledger is blocked for taxpayers due to the denial of Input Tax Credit.  Taxpayers are required to comply with pre-deposit requirements.

Court Ruling: The Madras High Court upheld the existing GST regulations, which require taxpayers to make pre-deposits using their Electronic Cash Ledger  when their ITC is denied and ECL access is blocked. The ruling provides clear guidance for taxpayers on how to proceed with pre-deposit requirements in such situations.

Implications for Taxpayers: Taxpayers must ensure that they comply with the pre-deposit requirements using the Electronic Cash Ledger  when faced with ITC denial. Even if the ITC is denied and the Electronic Credit Ledger is blocked, taxpayers can still use their Electronic Cash Ledger to make the necessary pre-deposit payments. This decision reinforces the importance of adhering to GST regulations and provides taxpayers with a clear course of action when dealing with ITC denial and blocked ECL access.

Other Important Court Ruling

  • Refund of Amount Debited from Ledgers Before Appeal: If an amount is debited from the electronic cash ledger and electronic credit ledger before the expiry of the statutory period for filing an appeal, the taxpayer is entitled to a refund. Taxpayers should not be forced to make payments before the statutory appeal period ends. Any such premature debits should be refunded to the taxpayer.
  • Pre-Deposit for Filing Appeal under Amnesty Scheme: The entire amount of pre-deposit for filing an appeal under the Amnesty Scheme should not be paid solely from the electronic cash ledger. Taxpayers can utilize their electronic credit ledger for part of the pre-deposit amount, ensuring that not all pre-deposit payments are made in cash. This provides flexibility and ease for taxpayers under the Amnesty Scheme.
  • These rulings provide significant relief to taxpayers by ensuring proper utilization and refund mechanisms for amounts debited from electronic ledgers and offering flexibility in pre-deposit payments under specific schemes.

Recent CBIC Updates on GST Electronic Cash Ledger

GST Electronic Ledger System

 

Extension of Exemption from Deposits into the Electronic Cash Ledger:  Section 51A(4) of the Customs Act. The exemption from deposits into the Electronic Cash Ledger has been extended until February 29, 2024. This extension provides additional time for importers and other stakeholders to adapt to the requirements of depositing funds into the Electronic Cash Ledger for customs-related payments.

Implementation of Electronic Cash Ledger for Import Duties:

  • Applicable for the payment of import duties for goods imported through courier mode. From March 1, 2024, importers who import goods via courier will need to use the Electronic Cash Ledger for paying import duties. This change is aimed at streamlining and digitizing the payment process, enhancing transparency and efficiency.
  • CBIC has extended the exemption from making deposits into the Electronic Cash Ledger under Section 51A(4) of the Customs Act until February 29, 2024. This provides additional time for stakeholders to comply with the requirements.
  • ECL for Courier Imports: Starting March 1, 2024, importers must use the Electronic Cash Ledger for paying import duties on goods imported through courier mode, aiming to streamline and digitize the payment process.

Key Point related to ITC 

Reduction of ITC for Credit Notes: The recipient must reduce the Input Tax Credit (ITC) for credit notes received in the returns filed by them.

  • Documentation to Fulfill This Requirement: Ensure that the credit notes received by you are reflected in your GSTR-2A. Maintain copies of the credit notes received. Keep copies of the invoices corresponding to the credit notes.
  • Reporting Credit Note Responsibility : Specifies the circumstances and time limit for issuing credit or debit notes. Rule 73 of the CGST Rules Mentions “reduction” in ITC by the recipient, not reversal. This supports the argument that ITC reduction due to credit notes should reflect as net ITC in GSTR-3B.

Interest on Excess ITC

  • Retrospective Amendment to Section 50: Interest applies only to the net tax liability paid via the electronic cash ledger. Therefore, if excess ITC is availed but not utilized and subsequently reversed without being set off against any output tax liability, no interest should be charged.
  • Reduction vs. Reversal: You can argue that the ITC is reduced (not reversed) due to credit notes, showing net ITC in GSTR-3B as per Rule 73.
  • Interest on Excess ITC: Interest should not be charged on excess ITC that is availed but not utilized, aligning with the retrospective amendment to Section 50.

FAQ on GST Electronic Ledger System under GST

Question: Taxpayer want to cancel one gst registration but in credit ledger there is some amount lying near about 2 lakh. can I cancel the registration?

Ans : you can cancel your GST registration by filing an application on the GST portal. However, you will have to pay an amount equal to the input tax credit in your electronic credit ledger or the output tax payable on your stock, whichever is higher. You can use your electronic cash ledger or electronic credit ledger or both to offset this liability.

Question: In one case, accountant had claimed excess ITC in 3B in comparison to gstr 2A. Now the case is in GST audit department. What do you suggest for Can we go for deposit the excess ITC through DRC 03?

Ans : Taxpayer can deposit the excess ITC through DRC-03 by debit of amount from electronic cash ledger  Or is there any other option?

Question: Taxpayer  wants to know that he is a regular GST dealer . He have a turnover of less than 40 lakhs. Can He get cancel my gst registration.  If yes then what is position of stock at the time of cancelation please suggest.

Ans: Yes, as a regular GST dealer with a turnover less than 40 lakhs, you can apply for cancellation of your GST registration. And for your stock at the time of cancellation, the taxpayer needs to fill the value of stock and corresponding tax liability on the stock, and accordingly offset the liability (tax payable) from Electronic Cash Ledger / Electronic Credit ledger equivalent to the credit of input tax in respect of inputs held in stock and inputs contained in semi-finished goods or finished goods held in stock or capital goods or plant and machinery, on the day immediately preceding the date of such cancellation or the output tax payable on such goods, whichever is higher.

**********************************************************

If this article has helped you in any way, i would appreciate if you could share/like it or leave a comment. Thank you for visiting my blog.

Legal Disclaimer:
The information / articles & any relies to the comments on this blog are provided purely for informational and educational purposes only & are purely based on my understanding / knowledge. They do noy constitute legal advice or legal opinions. The information / articles and any replies to the comments are intended but not promised or guaranteed to be current, complete, or up-to-date and should in no way be taken as a legal advice or an indication of future results. Therefore, i can not take any responsibility for the results or consequences of any attempt to use or adopt any of the information presented on this blog. You are advised not to act or rely on any information / articles contained without first seeking the advice of a practicing professional.