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CMA Intermediate · Direct and Indirect Taxation · Returns and Payment of Taxes

Under the CGST Act, 2017, how may the amount lying in a registered person's electronic cash ledger be used?

The electronic cash ledger can be used for paying tax, interest, penalty, fees or any other amount payable under the CGST Act or the rules, in the prescribed manner. It is not restricted to output tax, unlike the electronic credit ledger.

  1. AOnly for payment of output tax, and not for interest or penalty
  2. BFor payment of tax, interest, penalty, fees or any other amount payable under the Act or the rules, as prescribedCorrect
  3. COnly for payment of interest and penalty, but not for tax
  4. DOnly for payment of tax under the reverse charge

Explanation

Section 49(3) allows the cash ledger balance to be used for tax, interest, penalty, fees or any other amount payable under the Act or rules. The electronic credit ledger, by contrast, can be used only for output tax. The options limiting cash to tax only, interest only or reverse charge only are therefore wrong.

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