Taxation · Payment of Tax

Refund, Payment Rules and Other Provisions under GST for CA Inter

Updated 4 October 2026 · Fact-checked

GST payment rules say you deposit money in the electronic cash ledger by challan, then discharge liability from the cash or credit ledger. Reverse charge tax must be paid in cash, never from ITC. Surplus cash can be moved between heads by Form PMT-09 or refunded. Solve questions by fixing the ledger, the head and the order.

Understand Refund, Payment Rules and Other Provisions

Every registered person has three electronic ledgers on the GST portal: the electronic cash ledger, the electronic credit ledger and the electronic liability register. Liability goes into the register. You clear it from the credit ledger (ITC) or the cash ledger. Section 49 of the CGST Act, 2017 sets the rules.

To put money in the cash ledger, you generate a challan (Form GST PMT-06) on the portal. You then pay by net banking, credit or debit card, NEFT or RTGS. You can also pay over the counter (OTC) at an authorised bank, by cash, cheque or demand draft. Under Rule 87(3) of the CGST Rules, OTC payment is allowed for deposits up to ₹10,000 per challan per tax period. This cap does not apply to deposits by government departments and other persons notified by the Commissioner. A generated challan stays valid for 15 days. Cash in the ledger can pay tax, interest, penalty, fee or any other amount.

ITC in the credit ledger can pay only output tax. It cannot pay interest, penalty, late fee or tax payable under reverse charge. Reverse charge tax must be paid in cash. Once paid, the tax may give you ITC from the next stage, if the usual conditions of Section 16 are met.

If you deposit money under the wrong head, you do not lose it. Under Section 49(10) you can transfer the amount between heads (CGST, SGST/UTGST, IGST and cess) in the cash ledger by filing Form GST PMT-09. Any balance left in the cash ledger can also be claimed as a refund under Section 54, within two years from the relevant date. The claim is made through Form GST RFD-01, and the relevant date is as per the Explanation to Section 54.

When you use ITC, the credit of each head has an order of use. IGST credit is used first for IGST, then for CGST, then for SGST/UTGST. CGST credit is used for CGST first, and only the remainder for IGST. SGST/UTGST credit is used for SGST/UTGST first, and only the remainder for IGST. Under Sections 49A and 49B, CGST or SGST/UTGST credit goes towards IGST only after the own-head liability is cleared and the IGST credit is fully used.

When you discharge liability, Section 49(8) sets the order. First come the self-assessed tax and other dues of the return: those of earlier tax periods, then those of the current tax period. Any other amount payable comes after that, for example an amount arising from a demand order. Within each category, the order is tax, interest, penalty, fee and then others.

Timing matters. Self-assessed tax is due by the last date for filing the return. A monthly filer pays by the 20th of the next month with GSTR-3B. A QRMP taxpayer files the return quarterly but pays tax for the first two months of the quarter by the 25th of the next month using Form PMT-06. For this payment the taxpayer can choose between two separate methods. The fixed sum method is 35% of the tax paid in cash in the preceding quarter's return (for a person who was a monthly filer, 35% of the cash paid in the last return of the preceding quarter). It is not available to a registered person who has not furnished the return for the preceding quarter. For example, a new registrant has no such return, so it must use the self-assessment method. The self-assessment method is the actual tax liability of the month. The quarterly GSTR-3B is due on the 22nd or 24th of the month after the quarter, depending on the State.

Key rules to remember

Ledger rule: Cash ledger → tax, interest, penalty, fee, any other amount | Credit ledger → output tax only; ITC can never pay interest, penalty, late fee or RCM tax.
Reverse charge payment: RCM tax = payable in cash only; The ITC balance cannot be used even if it is large. Credit of RCM tax is available after cash payment, if eligible.
OTC deposit limit: OTC deposit ≤ ₹10,000 per challan per tax period (Rule 87(3), CGST Rules); OTC payment is made through an authorised bank by cash, cheque or demand draft. The cap does not apply to deposits by government departments and other persons notified by the Commissioner.
Challan validity: Challan valid for 15 days from generation; Pay within this window or generate a new challan.
Order of discharge of liability (Section 49(8)): First: self-assessed tax and other dues of the return (earlier tax periods first, then current tax period) | Then: any other amount payable | Within each category: tax → interest → penalty → fee → others; Applies when liability is discharged from the ledgers. Self-assessed dues of the return come before other amounts such as those arising from demand orders.
ITC utilisation by head: IGST credit → IGST first, then CGST, then SGST/UTGST | CGST credit → CGST first, then IGST | SGST/UTGST credit → SGST/UTGST first, then IGST; Under Sections 49A and 49B, CGST and SGST/UTGST credits are used for IGST only after the own-head liability is cleared, and IGST credit must be fully used first. CGST credit cannot pay SGST/UTGST, and SGST/UTGST credit cannot pay CGST.
Transfer between heads: Cash ledger balance of one head → another head by Form GST PMT-09; Section 49(10). It covers tax, interest, penalty, fee and other amounts.
QRMP monthly payment: fixed sum method: Fixed sum = 35% of the tax paid in cash in the preceding quarter's return (for a person who was a monthly filer: 35% of the cash paid in the last return of the preceding quarter); Paid by the 25th of the next month through PMT-06 for the first two months of the quarter. Not available to a registered person who has not furnished the return for the preceding quarter (for example, a new registrant); such a person uses the self-assessment method. The self-assessment method (actual tax of the month) is a separate alternative, not part of this formula.
Refund of ledger balance: Balance in cash ledger → refund under Section 54 by Form GST RFD-01, claim within 2 years from the relevant date (Explanation to Section 54); Credit ledger balance is refundable only in limited cases such as zero-rated supplies and inverted duty.

How to solve Refund, Payment Rules and Other Provisions questions

Use this method for any payment, RCM, transfer or due date question.

1List the liability by head: IGST, CGST, SGST/UTGST, and by type (forward charge, reverse charge, interest, penalty).
2Separate the reverse charge tax. Mark it as payable in cash only.
3List the ITC balance by head from the credit ledger.
4Apply ITC head by head to forward-charge output tax: IGST credit on IGST first, then CGST/SGST; CGST credit on CGST then IGST; SGST credit on SGST then IGST. CGST and SGST credit go to IGST only after the own-head liability is cleared and IGST credit is fully used. Do not cross CGST and SGST.
5Compute the balance for each head. The cash ledger pays RCM tax, interest, penalty, fees and the shortfall of output tax.
6Check whether a wrong-head deposit or surplus cash exists. If yes, use PMT-09 for a transfer, or a Section 54 refund claim through Form GST RFD-01.
7Check the date: 20th for monthly filers, 25th for QRMP monthly payment, and the quarterly return date. Add the mode of payment if asked.
8Write the final answer in a small table-like list: cash payable by head and ITC utilised by head.

Quickest way: Cash and credit split in two passes

When to use it: Use it for numerical MCQs and 5 to 8 mark written questions on payment of tax.

MCQ trick: if an option says RCM tax is paid from ITC, or CGST credit is used for SGST, eliminate it at once.
MCQ trick: OTC means ₹10,000 per challan per tax period under Rule 87(3). An option with a higher figure is wrong, unless the question says the depositor is a government department or another person notified by the Commissioner.
Pass 1: pay RCM and any interest or penalty in cash. Do not touch ITC.
Pass 2: set off ITC against forward-charge output tax head by head. Cash is the remainder.
Written format: show the head-wise table (liability, ITC used, cash), quote Section 49 as the rule, and end with the conclusion line. This format earns step marks even if one figure is wrong.

Common mistakes in Refund, Payment Rules and Other Provisions

Using ITC to pay reverse charge tax
Students treat all tax as one pool and see a large ITC balance.
Fix: Remember that RCM tax is a cash item. ITC arises later, after cash payment, subject to eligibility.
Using CGST credit to pay SGST liability (or the reverse)
Both are taxes on the same supply, so they look interchangeable.
Fix: CGST and SGST credits are never cross-utilised. Only IGST credit can pay both, and each credit can pay IGST.
Quoting the wrong OTC limit or applying it per day
Students recall the figure ₹10,000 but not what it applies to.
Fix: Say ₹10,000 per challan per tax period under Rule 87(3), by cash, cheque or demand draft. Add that the cap does not apply to government departments and other persons notified by the Commissioner.
Using ITC for interest, penalty or late fee
Students mix up what the credit ledger can pay.
Fix: Credit ledger pays output tax only. All other amounts need cash.
Treating a wrong-head deposit as lost, or applying for refund first
Students forget Section 49(10).
Fix: Use PMT-09 to move the amount to the correct head. Claim a refund only for surplus you do not need.
Giving the 20th as the due date for a QRMP taxpayer's monthly payment
The monthly filer's date is memorised and applied to everyone.
Fix: QRMP: monthly payment by the 25th of the next month; the return is quarterly.

Worked examples

Example 1

For a month, Alpha Traders has this liability: forward-charge output tax IGST ₹30,000, CGST ₹20,000, SGST ₹20,000. It also has RCM liability of CGST ₹6,000 and SGST ₹6,000. Credit ledger balances: IGST ₹30,000, CGST ₹12,000, SGST ₹5,000. Compute the cash to be paid, head-wise.

Show the solution

RCM tax is payable in cash only: CGST ₹6,000 and SGST ₹6,000.
IGST credit is used first against IGST output tax. IGST output ₹30,000 is set off against IGST credit ₹30,000. Cash for IGST = ₹0. The IGST credit is now fully used, so none is left for CGST or SGST.
CGST output ₹20,000: use CGST credit ₹12,000. Balance ₹8,000 is paid in cash. No IGST credit is left.
SGST output ₹20,000: use SGST credit ₹5,000. Balance ₹15,000 is paid in cash.
Cash for CGST = ₹8,000 + ₹6,000 = ₹14,000.
Cash for SGST = ₹15,000 + ₹6,000 = ₹21,000.
Total cash = ₹0 + ₹14,000 + ₹21,000 = ₹35,000.

Answer: Cash payable: IGST ₹0, CGST ₹14,000, SGST ₹21,000, total ₹35,000. ITC used: IGST ₹30,000, CGST ₹12,000, SGST ₹5,000.

Example 2

Beta Ltd is a QRMP taxpayer that furnished its return for the preceding quarter and wants to use the fixed sum method. It paid ₹2,00,000 in cash in the GSTR-3B of the preceding quarter. (a) What is the amount payable for each of the first two months of the quarter and by when? (b) It also deposited ₹20,000 in the IGST head by mistake, but its liability is under CGST. What can it do?

Show the solution

(a) Beta Ltd furnished the preceding quarter's return, so the fixed sum method is available to it.
Fixed sum = 35% of tax paid in cash in the preceding quarter's return.
35% × ₹2,00,000 = ₹70,000 for each of the two months.
It is paid through Form PMT-06 by the 25th of the month following each month.
(b) Section 49(10) allows transfer between heads in the cash ledger.
File Form GST PMT-09 to move ₹20,000 from IGST to CGST. Then pay the CGST liability from the cash ledger.

Answer: (a) ₹70,000 for each of the first two months, payable by the 25th of the next month through PMT-06. (b) Transfer ₹20,000 from IGST to CGST by Form GST PMT-09 under Section 49(10).

Exam tips

Write 'Section 49, CGST Act, 2017' at the start of any answer on ledger rules, and state the rule in one line before computing.
For numerical questions, draw a head-wise table: liability, ITC used, cash paid. Show RCM as a separate cash line.
In MCQs, test each option against three rules: RCM in cash, no CGST-SGST crossing, OTC ₹10,000 per challan per tax period.
Learn two dates cold: 20th for monthly payment with GSTR-3B and 25th for QRMP monthly payment. Add the quarterly return date only if asked.
In case-based questions, check if the facts hint at a wrong-head deposit or surplus cash. These point to PMT-09 or a Section 54 refund.

Practice questions from Payment of Tax

Refund, Payment Rules and Other Provisions in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

Refund, Payment Rules and Other Provisions: frequently asked questions

Can ITC be used to pay reverse charge GST?

No. Tax payable under reverse charge must be paid in cash through the electronic cash ledger. After you pay it, you can claim it as ITC if the conditions for credit are met, and use that credit against later output tax.

How do I make a GST payment offline over the counter?

Generate a challan on the portal, choose the OTC mode, and print it. Take it to an authorised bank and pay by cash, cheque or demand draft. Under Rule 87(3), OTC deposit is allowed up to ₹10,000 per challan per tax period. The cap does not apply to government departments and other persons notified by the Commissioner.

Can I transfer an amount between heads in the electronic cash ledger?

Yes. Section 49(10) lets you transfer the balance of tax, interest, penalty, fee or other amount from one head to another (CGST, SGST/UTGST, IGST, cess). You file Form GST PMT-09 on the portal.

What is the GST payment due date for monthly and QRMP taxpayers?

A monthly filer pays by the 20th of the next month, along with GSTR-3B. A QRMP taxpayer pays tax for the first two months of each quarter by the 25th of the following month through PMT-06, either by the fixed sum method or by self-assessment. The fixed sum method is not available if the return for the preceding quarter was not furnished. The quarterly GSTR-3B is filed by the 22nd or 24th, depending on the State.

Can I get a refund of money lying in the electronic cash ledger?

Yes. Under Section 49 read with Section 54, you can claim a refund of the balance in the cash ledger. The claim is made through Form GST RFD-01 within two years from the relevant date, as per the Explanation to Section 54.