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CA Intermediate · Taxation · Payment of Tax

Meera Traders, a registered person in Pune, has an outward tax liability of Rs 90,000 CGST for the month. Its electronic credit ledger shows IGST credit of Rs 60,000 and SGST credit of Rs 50,000. It has no CGST credit. Ignoring cash, what is the maximum CGST liability that can be discharged using the credit balances available, and in what manner?

Only Rs 60,000 can be set off, using the IGST credit. SGST credit cannot be used to pay CGST liability, so the remaining Rs 30,000 must be paid in cash. IGST credit alone is freely usable against CGST.

  1. ARs 60,000 using IGST credit; SGST credit cannot be used for CGSTCorrect
  2. BRs 90,000 using IGST credit of Rs 60,000 and SGST credit of Rs 30,000
  3. CRs 50,000 using SGST credit only, as IGST must be used first for IGST
  4. DRs 90,000 using SGST credit of Rs 50,000 and IGST credit of Rs 40,000

Explanation

IGST credit can be used for IGST first, then CGST and SGST in any order. SGST credit cannot be used to pay CGST. So only the Rs 60,000 of IGST credit can be applied against the Rs 90,000 CGST liability, leaving Rs 30,000 to be paid in cash. Options using SGST credit for CGST are wrong because cross-utilisation between CGST and SGST is barred.

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