Skip to content

CA Intermediate · Taxation · Payment of Tax

Sharma Traders, a registered person, has an electronic cash ledger balance of Rs 40,000 and an electronic credit ledger balance of Rs 90,000 (all IGST). For a month its output liability is: IGST Rs 50,000, CGST Rs 30,000, SGST Rs 30,000. Which statement correctly describes how the liability can be discharged?

IGST credit is first applied to IGST liability, and any balance may be used towards CGST and SGST in any order. Any remaining liability is paid through the electronic cash ledger. IGST credit is therefore not restricted to IGST liability alone.

  1. AIGST credit of Rs 90,000 can be used first for IGST Rs 50,000 and the balance Rs 40,000 for CGST and SGST in any order, then cash for the restCorrect
  2. BIGST credit can be used only against IGST liability, and CGST and SGST must be paid fully in cash
  3. CIGST credit must be used first against CGST and SGST, and only then against IGST
  4. DIGST credit can be used against SGST first, then CGST, and IGST liability must be paid in cash

Explanation

IGST credit must be used first towards IGST liability (Rs 50,000). The balance Rs 40,000 may then be used against CGST and SGST in any order. Remaining liability of Rs 20,000 is paid from cash (cash ledger Rs 40,000 suffices). The option saying IGST credit can pay only IGST is wrong because the balance can be applied to CGST and SGST.

Did you get it right without looking?

One question tells you little. A timed set on Payment of Tax shows your real accuracy, how long you take and where you lose marks.

Practise Payment of TaxFree diagnostic mock

More Payment of Tax questions