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CA Intermediate · Taxation · Payment of Tax

Vihaan Traders, Pune, has an electronic cash ledger balance of Rs 40,000. Its output CGST liability for a month is Rs 90,000 and it has CGST credit of Rs 60,000 in the electronic credit ledger. It also has IGST credit of Rs 50,000 and no IGST liability. Ignoring interest, what is the minimum CGST amount to be paid in cash if the firm uses its credit in the order the law permits?

The cash payable is nil. IGST credit can be used first against CGST liability, and with the CGST credit the total available credit is Rs 110,000, which exceeds the Rs 90,000 output CGST. So the liability is discharged fully from the credit ledger and no cash is needed.

  1. ARs 0Correct
  2. BRs 30,000
  3. CRs 20,000 only after using IGST credit
  4. DRs 90,000

Explanation

IGST credit must be used first for IGST liability, and the balance can then be used for CGST liability. There is no IGST liability, so the Rs 50,000 IGST credit is applied against CGST, followed by CGST credit. Rs 50,000 + Rs 60,000 = Rs 110,000, which exceeds the Rs 90,000 liability, so nothing is payable in cash. Paying Rs 30,000 wrongly ignores the IGST credit.

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