Utilisation of the amounts available in the electronic credit ledger for payment of tax and other liabilities.
CBIC vide Circular No. 172/04/2022-GST dated 06th July 2022 issued clarification on this subject.
Here is the text of the circular:
1.In terms of sub –section (4) of section 49 of CGST Act, the amount available in the electronic credit ledger may be used for making any payment towards output tax under the CGST Act or the Integrated Goods and Services Tax Act, 2017(hereinafter referred to as “IGST Act”),subject to the provisions relating to the order of utilisation of input tax credit as laid down in section 49B of the CGST Act read with rule 88A of the CGST Rules.
2.Sub-rule (2) of rule 86 of the CGST Rules provides for debiting of the electronic credit ledger to the extent of discharge of any liability in accordance with the provisions of section 49 or section 49A or section 49B of the CGST Act.
3.Further, output tax in relation to a taxable person (i.e. a person who is registered or liable to be registered under section 22 or section 24 of the CGST Act) is defined in clause (82)of section 2 of the CGST Act as the tax chargeable on taxable supply of goods or services or both but excludes tax payable on reverse charge mechanism.
4.Accordingly, it is clarified that any payment towards output tax, whether–
- self-assessed in the return or
- payable as a consequence of any proceeding instituted under the provisions of GST Laws,
can be made by utilization of the amount available in the electronic credit ledger of a registered person. In nutshell you can use ITC balance for paying tax using DRC-03 as well.
5.It is important to note that output tax does not include tax payable under the reverse charge mechanism (RCM). Therefore, the electronic credit ledger cannot be used to pay any tax under RCM.
Can we use ITC balance for paying interest, penalties etc?
ITC balance cannot be used for making payment of any interest, penalty, fees or any other amount payable under the said acts.
Similarly, the electronic credit ledger cannot be used to pay for an erroneous refund that was previously sanctioned in cash.
use of ITC for interest payment