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CS Professional · Goods and Services Tax (GST) and Corporate Tax Planning · Procedural Compliance under GST

Mehta Traders has a balance of Rs 40,000 of SGST credit and Rs 10,000 of CGST credit in its electronic credit ledger. It has an intra-State outward supply on which it must pay CGST of Rs 25,000 and SGST of Rs 25,000, and it has no cash balance. Which statement is correct about discharging the CGST liability?

Only the Rs 10,000 CGST credit can be used against CGST. State tax credit cannot be used to pay central tax, so the remaining Rs 15,000 of CGST must be paid in cash through the electronic cash ledger.

  1. AThe Rs 15,000 CGST shortfall can be met from the SGST credit
  2. BThe SGST credit can be used for CGST after CGST credit is exhausted
  3. COnly the Rs 10,000 CGST credit can be used; the remaining Rs 15,000 CGST must be paid in cashCorrect
  4. DCGST liability can be paid from IGST credit only, not from cash

Explanation

Under section 49(5)(f), State tax credit cannot be used for CGST. Only the Rs 10,000 CGST credit is available, so the balance Rs 15,000 must be paid through the electronic cash ledger. The SGST credit of Rs 40,000 covers the SGST of Rs 25,000.

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