All You Need To Know About Tax Payments under GST

The GST tax payments can be made online from the GSTN portal.

However, there are certain parameters as a taxpayer that you must consider while making your tax payments.

Though the payment processes under GST might seem complicated, we will make it simple for your understanding.

Since GST is the new norm for indirect taxes, we dive a little deeper into the Tax Payment structure.

Payments to make under GST

Under the GST, transactions like sale, transfer, barter, lease, or importing of goods, as well as services, attract CGST (to be levied by Centre) and SGST (to be imposed by states).

The CGST and SGST are to be paid for intra-state supply.

The CGST is the Central GST wherein the payments are made to the central Government, and the SGST is the State GST wherein the payments are made to the State government.

In case of an inter-state supply, you are required to pay IGST.

This is the Integrated GST, which includes both the components of CGST and SGST.

In addition to this, you also have to pay to the Government through TDS or Tax Deducted at Source and TCS or Tax Collected at Source.

Any additional payments in the form of penalties, interests, fees, etc. are also needed to be made.

Liability of the Payment of GST

If you are a supplier of goods or services, you are liable to pay GST.

But in certain situations like imports and other notified supplies, the liability is cast on the recipients under the reverse charge mechanism.

Also, in certain instances, the liability to pay is on the third person.

For example, if you are in the e-commerce industry, the operator is responsible for TCS or the government department will be accountable for TDS

The time of Payment of GST

You are liable to pay GST at the time of the supply of goods, as stated under Section 12. Similarly, you are also susceptible to make payment at the time of the supply of services, as stated under Section 13.

Additionally, the Payment can also be made at the earliest of the occurrence of any one of the three events – receiving the payments, issuance of the invoice, or completion of supply.

The payment liability at the occurrence of each event and different tax additions have been explained in detail in the Sections mentioned above.

Features of the GST payment processes

As defined under Goods and Services Tax (GST), the payment process differs drastically from current payment procedures.

At each step of the process — like all other aspects of GST — now can happen online all within the GST portal.

Section 49 of the CGST or the Central GST and Service Act, accompanying rules published by the Central Board of Excise and Customs or CBEC, govern the new payment procedures.

The new payment methods of GST have features as follows.

  • The challan is electronically generated from the GSTN Common portal. Therefore, there is no requirement of a manually prepared challan.
  • The taxpayers can now enjoy a seamless tax payment process through multiple modes of online payment.
  • The tax collection data is stored in an electronic and safe format.
  • There is a faster remittance of revenue to the Government.
  • The online payment processes have resulted in paperless transactions.
  • Instant transfers lead to quicker accounting and reporting.
  • Electronic reconciliation of all receipts
  • Simplified procedure for banks
  • Warehousing of Digital Challan.

Payment Methods

There are two simple methods of making GST payments. Let’s discuss them in detail.

Method 1

The first method is through the debit of Credit Ledger of the taxpayer maintained on the Common Portal.

It is important to note that only tax payment can be made here. Other Interest, Penalty, and Fees cannot be paid by debit in the credit ledger.

As a taxpayer, you can use the credit of taxes on inputs and use them to pay the output tax.

It is important to remember that you can only use the credit of IGST towards payment of IGST, CGST, and SGST in that particular order.

This means that you cannot use the credit of CGST for the payment of SGST and so on.

Method 2

The second payment method is through cash. This can be done from the debit in the Cash Ledger.

This is maintained on the Common Portal.

The amount can be deposited in the Cash Ledger by different modes like E-Payment – Internet Banking, Credit Card, Debit Card – Real Time Gross Settlement or RTGS, National Electronic Fund Transfer, or NEFT.

You can also make payments Over the Counter in branches of Banks, which are Authorized to accept the GST deposit.

Supplier’s tax payment

The payment of taxes is to be made on a monthly basis. And on the 20th of the succeeding month.

This means that the payment of taxes for March shall be paid by the 20th of April.

As a taxpayer, you can debit the ledger while making these monthly returns, and it can be reflected in the relevant entry. Composition taxpayers will need to pay tax every quarter.

Extension of time for the Payment.

In the case of self-assessed liability, an extension for the Payment of liability is not permitted.

In other cases, the competent authority has the power to extend the period or allow payment in installments.

You can learn more about this under Section 80 of the CGST/SGST Act.

Filing returns but Payment of Tax.

In situations wherein the taxpayer files returns but does not pay the taxes, then it is not a valid return.

Under Section 2(117), a valid return is the one wherein the self-assessed tax is paid in full.

The Input Tax Credit can be accessed only when the return is valid.

So it is only when the supplier has paid the complete self-assessed tax and filed return, the receipt files returns as well, then the ITC can be confirmed.

The consideration of Date of deposit

The date of the presentation of the cheque, the date of the payment, or even the date of the credit of the amount to the Government account is considered as the date of deposit.

Electronic Ledger.

The electronic ledger is also known as E-ledger and maintains a statement of cash and input tax made by each taxpayer.

The taxpayer can keep track of his liabilities on the GST Portal. The E-ledger is categorized across three ledgers.

The electronic liability ledger is also known as electronic tax liability register and records accounts of a taxpayer’s gross tax liability.

  • An Electronic credit ledger or electronic input tax credit ledger records the tax payments that have been previously made during various steps of the supply chain.
  • All the payments made by the taxpayer are reflected in the electronic cash ledgers.

Let’s analyze these ledgers individually in detail.

The electronic liability ledger

The following are recorded in the electronic liability ledger.

  • The payment of tax, fees, interest, and other payable amounts as listed by the taxpayer.
  • The tax and interest which is payable due to discrepancies or mismatch of ITC.
  • Any other interest that is accrued on a timely basis.

A taxpayer is also required to make payments of his liabilities in the following sequence.

  • Any previous tax period returns, which are self-assessed, or dues like interest, fees, penalties, etc.
  • Any current period returns that are self-assessed and other dues.
  • Any other payable amounts under the Act.

Electronic credit ledger

Every claim of ITC, which is self-assessed by the taxpayer, is credited here. This amount can be used as a payment towards output tax.

  • The inward supplies from taxpayers.
  • ITC based on distribution from input services distributors or ISD.
  • ITC on the semi-finished goods or finished goods held in stock.

Electronic cash ledger

Any amount that the taxpayer pays is reflected in this ledger.

The amount can also be used towards the payment of taxes, fees, interest, and any other dues as stated under the Act.

To make the payments, the taxpayers need to generate an online challan.

This is valid for 15 days from the date of generation, and the payment can be made through –

  • Internet banking only through the authorized banks
  • Credit as well as debit cards through the authorized banks.
  • NEFT or National Electronic fund transfer as well as RTGS or Real Time Gross Settlement through any banks.
  • Over the counter payments at authorized banks.

Apart from the above, the taxpayer also needs to pay any commission that is due.

The official date is recorded as the date the payment is credited to the Government account.

The taxpayers who are unregistered can make tax payments through the GST portal by generating a temporary ID.

Relationship between GSTN and the authorized Banks.

The GSTN and the Core Banking Solutions or the CBS of the bank are linked in real-time.

A CPIN, which we discuss later, is automatically routed to the authorized bank for a verification and acceptance of payment.

The Bank automatically sends a Challan Identification Number or a CIN, discussed later, for confirmation of the payment.

Therefore, there is no manual interference by bank cashiers or tellers or the taxpayer.

Generation of challan in multiple sittings

A taxpayer has the option to fill the challan form and save it temporarily partially.

This allows him to come back at a later stage and complete the form.

This challan can be edited any time before submission.

He can then generate the challan for the payment of his taxes.

Modification of the online generated challan.

After the taxpayer has logged into the GSTN portal for the generation of challan, additional details can be filled in by his authorized personnel.

The data can be saved midway with the promise of future completion.

It is important to note that once the challan and the CPIN are generated, it cannot be modified any further.

The validity period of challan

Once the challan is generated online, it is valid for about 15 days from the date of generation.

It will then be disposed of from the system. However, a taxpayer can re-generate challan as per his requirement and convenience.

CPIN or Common Portal Identification Number

CPIN or the Common Portal Identification Number is available to the taxpayer at the time of the generation of a challan.

The CPIN is a 14-digit unique number that is used to identify a challan. This CPIN is valid for 15 days from the date of its generation.

CIN or Challan Identification Number

The CIN or a Challan Identification Number is a 17-digit unique number.

This includes the 14-digit CPIN (as discussed above) and 3-digit bank code.

The CIN is generated from the RBI or the Reserve Bank of India once the payment is received by RBI and credited to the corresponding Government account.

The CIN acts as an indication that the payment has been realized and credited to the appropriate government account.

The authorized bank communicates CIN to taxpayers as well as to GSTN.

E-FPB or Electronic Focal Point Branch

E-FPB is an abbreviation for the Focal Point Branch.

It is essentially a branch of authorized banks for the collection of GST.

Every bank that is authorized can nominate one of its branches as an E-FPB for Pan India transactions. 

Tax Deducted at Source

TDS is an abbreviation for Tax Deducted at Source (TDS).

Under Section 51, the Government, Government undertakings, and other entities make contractual payments.

Here, the total value of such amount under a contract exceeds Rs.2.5 Lakhs to suppliers.

The concerned Government or authority also deducts 1% of the total payment and remits it to the corresponding GST account.

Supplier accounts for TDS while filing his return.

The amount shown as TDS payment will also be reflected in the electronic cash ledger of the supplier.

The supplier can use this amount to pay his liabilities like tax, interest, fees, and other such payments.

Method for the TDS Deductor to account for TDS

TDS Deductor accounts for TDS in the following ways:

  • The TDS deductor must be registered under Section 24 of the CGST or SGST Act.
  • The TDS collected by the 10th day of the month must be remitted and reported in Form -GSTR 7.
  • This TDS amount deposited will be reflected in the electronic cash ledger of the supplier.
  • A certificate of such TDS payment is issued. This certificate is given to the deductee within five days of crediting the TDS to the govt a/c.

Tax Collected at Source

TCS or Tax Collected at Source is a provision accessible only for E-commerce operators, as stated under Section 52 of the CGST or the SGST Act.

The E-commerce operator is not an agent and, therefore, is required to withhold a certain amount.

This amount is calculated at the rate and does not exceed one percent of the next value of taxable supplies.

The e-commerce operator needs to deposit the withheld amount to the respective GST account by the 10th of the preceding month.

This deposit is also reflected in the Electronic cash ledger of the supplier.

The net value of taxable supplies

The net value of taxable supplies refers to the aggregate value of the total taxable goods or services.

Apart from the services stated under Section 9(5), all the other taxable services of goods or services are made in any month, reduced by the aggregate value of the supplies returned to the suppliers in that exact month.

Pre-registration of credit card for GST tax Payment

The taxpayer must pre-register his credit card through which he wishes to make the payment.

And this is also maintained on the GSTN’s Common Portal.

The GSTN can also set up a system with the banks to confirm and verify with the credit card service provider.

This ensures that the credit card payment process is seamless without any monetary limit and enhances the business experience. 

Conclusion

The GST payment process and the parameters discussed above are of importance to stay compliant.

You must always be aware of the necessary GST payment formats and keep yourself updated. This will help you make the right GST payment calculations, and adhere to the GST payment dates.

You must also be vigilant to pass the correct entries of GST payment vouchers in the electronic ledgers for timely payments.

You can also visit the official GSTN portal to get additional details on the Sections stated in this article and other information.

Don’t forget to comment below if you have any queries or concerns.

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