The three ledgers
They are not interchangeable, and that is the point.
- Credit ledger — holds ITC, and can only be used to pay tax, never interest, penalty or late fee
- Cash ledger — funded by challan, and can pay anything including interest and penalty
- Liability ledger — the running record of what you owe
Set-off order
IGST credit must be exhausted first, against IGST liability then CGST then SGST. Only then can CGST credit be applied to CGST and IGST, and SGST credit to SGST and IGST. CGST and SGST credit can never offset one another — which is how a business ends up paying cash on one head while carrying an unusable balance on the other.
Making a payment
Payment is made against a challan in form PMT-06, valid for fifteen days. Amounts above ₹10,000 must be paid by net banking, card, NEFT/RTGS or UPI rather than over the counter. The deposit lands in the cash ledger, from where it is applied to the liability.
Interest
Interest runs at 18% per annum on tax paid late, computed from the day after the due date on the net cash liability. Credit wrongly availed and utilised attracts 24%. Interest is a cash-ledger item — it cannot be settled from credit.
Common questions
Can I use input tax credit to pay interest or a late fee?+
No. The credit ledger can only discharge tax. Interest, penalty, late fee and any amount under reverse charge must come from the cash ledger.
I have credit but the portal still shows cash payable. Why?+
Almost always the CGST/SGST split. Credit sitting on one head cannot pay liability on the other, so you can hold a healthy total balance and still owe cash on one side.
Can I claim a refund of the balance in my cash ledger?+
Yes. Unutilised balance in the electronic cash ledger can be refunded on application, unlike credit-ledger balances, which are refundable only in specific situations such as exports or an inverted duty structure.