Use of cash/ITC for Demand payment in GST

By LegalSalaah

Table of Contents

What is the use of cash/Input Tax Credit for payment of demand or any other amount?

The use of cash / ITC for payment of demand is about the payment of non-return related liabilities. These liabilities are created by the tax authorities through the generation of the Demand ID, which is a reference number of the order or application displayed in the Electronic Liability Register (Part-II).

From which account payments are made against the liabilities of a particular demand ID?

Payments against the liabilities of a particular demand ID can be made using the following book:

  • Cash balances available in the electronic cashbook; 
  • Input tax credit balance available in the electronic credit ledger.

How does the taxpayer know about the outstanding demands?

Taxpayers can get information about outstanding demands from the Electronic Liability Register (Part-II). 

After entering and selecting the services it is shown in the table where the taxpayer needs to go to Ledger then he will be able to see Electronic Liability Register (Part – II): other than the links related to return liability.

Who can utilizing the “Input tax credit/Cash for payment of demand or any other amount”?
The following persons may have the utility of cash/ITC for payment of demand or amount.

  • Person with a temporary ID
  • Taxpayer after the cancellation of registration 
  • Authorized / Judicial Tax Officer

What are the pre-conditions for use of cash / ITC for payment of demand or any other amount?

Following are the prerequisites or arrears for the use of cash / ITC for payment of demand:

  • Demand ID has already been generated against which payment is yet to be made.
  • The user must have a valid user ID and password and must have the necessary access to the same.

What are the details displayed to the taxpayer after selecting the Demand ID?

The following details are displayed after the user selects the Demand ID: –

1. Outstanding Liability for Tax, Interest, Penalty, Fees, and Others against Demand IDs selected for IGST / CGST / SGST / UTGST / Cess

2. Balance as per Electronic Cash Book

3. Balance as per electronic credit ledger

What are the details to be entered by the taxpayer after selecting the demand ID for payment?

After selecting the demand ID for payment, the taxpayer has to enter the following details:

1. Amount to pay

2. Amount to be paid through cash

3. Amount to be paid through ITC

How does the taxpayer get relief for reduced penalties if the payment is made within the period specified by law?

If the Demand ID is created under Section 74 of CGST / SGST / IGST / Cess Act, then by law, the GST portal shows less payment liability for penalties, if the taxpayer pays, as per the following conditions:

1. If payment is being made within 30 days from the date of communication of the order and

2. The taxpayer is making full payment of taxes and interest  by GST return filing as stated in the order;

The penalty amount displayed is 50% of the amount stated in the order and the remaining 50% penalty is waived. Accordingly, a credit entry is passed in the Electronic Liability Register – Part II.

Can a taxpayer make payments or multiple payments against a particular demand ID?

Yes, the GST portal allows the taxpayer to pay against a particular demand ID on several occasions as long as the outstanding payment is zero.

Are there any conditions for exemption of penalty against the Demand ID for the taxpayer?

Only if the payment is made against the Demand ID, which is made under Section 74 of the Act, within a specified period of 30 days from the date of communication of the order, the taxpayer is eligible for exemption of 50% of the penalty. 

The following conditions must also be met:

  • If the demands included in the orders are paid in full, the amount of the penalty waiver will be considered.

  • If the taxpayer does not pay the reduced penalty with tax and interest within 30 days, then no entry of the reduced penalty will be posted in the Liability Register – Part II.

  • Non-payment of any amount included in the demand for “other” or fee will not be considered towards eligibility for 50% exemption of penalty amount.

  • This conference will be held for every demand made under the above-mentioned section.

  • Such admission of penalty waiver will be tagged against the same demand for which payment is being made.

How will the taxpayer know that the use of cash / ITC has been successful?

On clicking the “Set-off” button, if the payment is successful, a success message with PRN (Payment Reference Number) is displayed and updated to all concerned leaders.

What is the payment reference number?

The payment reference number is a unique reference number for any payment transaction made on the GST portal which is posted in the Electronic Liability Register Part-II.

Which taxpayer leaders update on the use of cash / ITC?

1. On the use of ITC, a debit entry number is generated and posted against that demand ID in the Electronic Liability Register Part-II as well as the Electronic Credit Ledger.

2. On the use of cash, a debit entry number is generated and posted against that demand ID in the Electronic Liability Register Part-II as well as the Electronic Cash Ledger.

3. In case of full payment is made under demand order raised under Section 20 of IGST Act or Section 74 of CGST / SGST Act read with Section 21 of UTGST Act: An entry will be posted in the Electronic Liability Register Part II for a 50% penalty exemption.