For small business owners, one of the biggest benefits of the Goods and Services Tax regime is the convenient GST payment process. The GST system is almost entirely online, which means you can file and pay your taxes without leaving the office. When you follow the filing and payment deadlines each month, it’s a breeze to avoid costly penalties or late fees.
When Do You Need to Pay Your GST?
If you’re registered for the GST and are not part of the composition scheme, you need to file your taxes by the 10th of every month. This return covers the previous month. Any GST you owe is due by the 20th of each month. For example, you need to file your February return by March 10 and pay your February GST by March 20.
If you’re taking part in the composition scheme, you have a different payment schedule. In this case, you need to file your quarterly returns and pay the GST you owe by the 18th of the month that falls after the end of the quarter. Keep in mind the GST Council occasionally adjusts these dates if there are technical difficulties or other problems, so it’s a good idea to check the GST portal for updates.
Paying GST With Your Credit Ledger
When you’re ready to pay your GST, you can start with your credit ledger on the GST portal. This is where your input tax credit builds up over time. You can find your ledger in Form GST PMT-02. This credit can reduce your tax bill each month, so you don’t have to pay as much in cash. However, you can only use this credit to offset your taxes; you can’t use it to cover interest, penalties, or other fees.
When you get ITC, it’s split up into categories for integrated GST, state GST, and central GST. The government has specific rules for how you can use these different credits:
- IGST credit is applied first to liability for IGST. If there is extra credit, it goes to your CGST, and then to your SGST.
- CGST credit is used first to pay your CGST and then IGST.
- SGST credit pays your SGST bill and any remainder is credited to your IGST.
In short, this means you can’t use your CGST credit to pay your SGST, and vice versa.
Paying GST With Your Cash Ledger
Once you use your credits to reduce your taxes, you can pay the rest using your cash ledger. The cash ledger is like a digital wallet — you put money in, and the government deducts it to pay your bill. In the GST portal, your ledger is Form GST PMT-05.
When you’re ready to settle your tax bill for the month, you must create a challan in the GST portal. This requires you to fill in the different amounts you owe for tax, interest, penalties, and fees. Once you generate this challan, you can opt to pay online using internet banking, a credit card, a debit card, or an NEFT or RTGS from any bank. If you like, you can also make over the counter payment through an authorized bank by cash, cheque, or demand draft. This is only an option for amounts up to Rs 10,000 per tax period.
Once your payment goes through, it’s credited to your cash ledger. When you generate the challan, you have 15 days to make your deposit.
In most cases, your business can handle every tax payment online. By keeping track of your credit balance and depositing your funds on time, you can reduce your liability and avoid late fees.