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CA Intermediate · Taxation · Payment of Tax

Kabir Pvt Ltd, Surat, has a monthly output tax liability of Rs 3,00,000 for the month: CGST Rs 1,00,000, SGST Rs 1,00,000 and IGST Rs 1,00,000. Its credit ledger has IGST Rs 1,30,000, CGST Rs 50,000 and SGST Rs 90,000. Applying the utilisation rules and using credit to the fullest extent, what total amount must be paid in cash?

The cash payable is Rs 30,000. Total liability is Rs 3,00,000 and the total credit available is Rs 2,70,000, and all of it can be used because IGST credit covers IGST first and then CGST, while CGST and SGST credits cover their own taxes. The shortfall is paid in cash.

  1. ARs 30,000
  2. BRs 20,000Correct
  3. CRs 40,000
  4. DRs 50,000

Explanation

IGST credit of Rs 1,30,000 first discharges IGST liability of Rs 1,00,000, leaving Rs 30,000. Of that balance, Rs 30,000 goes to CGST first, bringing CGST liability to Rs 70,000. CGST credit Rs 50,000 then leaves Rs 20,000 for CGST in cash. SGST liability Rs 1,00,000 less SGST credit Rs 90,000 leaves Rs 10,000 in cash. Total cash = Rs 20,000 + Rs 10,000 = Rs 30,000. Check: Total liability Rs 3,00,000 less total credit Rs 2,70,000 = Rs 30,000, so the key is Rs 30,000.

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