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CA Intermediate · Taxation · Payment of Tax

Bharat Steels has output liability for the month: IGST Rs 50,000, CGST Rs 30,000, SGST Rs 30,000. Its electronic credit ledger shows IGST Rs 60,000, CGST Rs 20,000, SGST Rs 25,000. Assuming no blocked credit and following the prescribed order of utilisation, what is the minimum amount to be paid in the electronic cash ledger?

The minimum cash is Rs 5,000 if surplus IGST credit is applied to CGST. IGST credit first clears IGST Rs 50,000, the remaining Rs 10,000 goes to CGST, CGST credit clears the rest, and SGST of Rs 30,000 less credit Rs 25,000 leaves Rs 5,000 cash.

  1. ARs 5,000
  2. BRs 15,000Correct
  3. CRs 25,000
  4. DRs 35,000

Explanation

IGST credit is first used against IGST liability: Rs 50,000, leaving Rs 10,000. The balance IGST credit is then applied to CGST: Rs 10,000, so CGST liability left is Rs 20,000, which is cleared with CGST credit of Rs 20,000. SGST liability Rs 30,000 is met by SGST credit Rs 25,000, leaving Rs 5,000 cash. Total cash: Rs 5,000. Check: this uses IGST Rs 60,000 and CGST Rs 20,000 fully. But IGST balance could instead go to SGST; the law permits the balance IGST credit against CGST and SGST in any order, so choosing SGST first minimises cash. IGST Rs 10,000 against SGST leaves SGST Rs 20,000, which SGST credit Rs 25,000 covers, and CGST Rs 30,000 less CGST credit Rs 20,000 leaves Rs 10,000 cash. Both give different cash, so the first route is not the minimum necessarily. Using IGST Rs 10,000 on CGST gives cash Rs 5,000 and using it on SGST gives Rs 10,000.

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