Payment of Tax under GST 

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Payment of Tax under GST

 

The Goods and Services Tax (GST) regime in India has simplified indirect taxation by combining multiple taxes into a single system. One of the most critical aspects of GST compliance is the payment of tax. Timely and accurate payment ensures smooth business operations, proper Input Tax Credit (ITC) flow, and avoids penalties or interest charges.

In this detailed guide, we will explain how tax payment works under GST, modes of payment, utilization of input tax credit, due dates, and compliance requirements for businesses in 2025.

What is Payment of Tax under GST?

Under GST, registered taxpayers are required to pay tax on the outward supplies of goods and services made during a tax period. The tax paid includes:

  • Output Tax: GST collected on sales (outward supplies).

  • Input Tax Credit (ITC): Credit available for GST paid on purchases (inward supplies).

  • Net Tax Liability: The amount payable after adjusting ITC against output tax.

Tax payment is made through the GST Portal before filing GSTR-3B for a particular month or quarter.

When to Pay GST?

The due date for GST payment depends on the return filing frequency:

  • Monthly Filers: Payment must be made by the 20th of the following month along with GSTR-3B.

  • Quarterly Filers (under QRMP scheme): Payment is made for the first two months of the quarter using PMT-06 challan, and final payment is made at the time of filing GSTR-3B at the end of the quarter.

Modes of Payment of GST

There are three major modes for paying GST:

  1. Online Payment

    • Internet banking through authorized banks.

    • Credit/debit cards (where allowed).

    • Unified Payment Interface (UPI) and NEFT/RTGS options.

  2. Over the Counter (OTC) Payment

    • Available for amounts up to ₹10,000 per challan per tax period.

    • Can be paid in cash, cheque, or demand draft at authorized banks.

  3. Utilization of ITC

    • ITC available in the Electronic Credit Ledger can be used to pay CGST, SGST/UTGST, and IGST liabilities (subject to rules).

    • Any remaining liability after utilizing ITC must be paid in cash through Electronic Cash Ledger.

Understanding GST Payment Ledgers

The GST system uses three electronic ledgers for tax payment and compliance:

  • Electronic Liability Register: Shows total tax, interest, and penalty liability.

  • Electronic Credit Ledger: Displays available Input Tax Credit for utilization.

  • Electronic Cash Ledger: Works like an e-wallet where taxpayers deposit money and use it to pay GST liability.

Order of ITC Utilization

As per GST rules, the order of utilization of ITC is as follows:

  1. IGST Credit: First used for IGST liability, then CGST, and then SGST/UTGST.

  2. CGST Credit: Used for CGST liability first, then IGST (cannot be used for SGST/UTGST).

  3. SGST/UTGST Credit: Used for SGST/UTGST liability first, then IGST (cannot be used for CGST).

Proper utilization of ITC helps reduce cash outflow for businesses.

Consequences of Late Payment of GST

Failure to pay GST on time can lead to:

  • Interest: Currently, interest is charged at 18% per annum on delayed tax payment.

  • Late Fees: If returns are not filed on time, late fees are applicable (₹50 per day for normal returns, ₹20 per day for nil returns).

  • Blocking of ITC: In case of continued non-payment, authorities can block ITC or take legal action.

Steps to Make GST Payment Online

Here is a simple step-by-step process for GST tax payment:

  1. Login to the GST Portal.

  2. Navigate to Services → Payments → Create Challan.

  3. Enter tax details and select payment mode (Net Banking/NEFT/OTC).

  4. Generate GST PMT-06 challan.

  5. Make payment and receive CIN (Challan Identification Number).

  6. The amount will reflect in the Electronic Cash Ledger for utilization.

Best Practices for Timely GST Payment in 2025

  • Maintain Accurate Records: Reconcile sales and purchase data every month.

  • Monitor ITC Regularly: Claim eligible ITC and use it to offset liability.

  • Set Reminders: Keep track of due dates to avoid last-minute rush.

  • Use Technology: Adopt GST-compliant accounting software for automation and error-free calculation.

  • Review Notices: Respond promptly to any tax notices regarding payment discrepancies.

Final Thoughts

Payment of tax under GST is one of the most important compliance requirements for businesses. Timely payment not only avoids penalties and interest but also ensures smooth flow of Input Tax Credit.

In 2025, with increased data analytics and real-time monitoring by the GST department, businesses must prioritize accurate tax calculation, ITC utilization, and on-time payment to remain compliant.

By following proper procedures, using automated tools, and reconciling returns regularly, businesses can avoid cash flow issues and maintain a good compliance rating under GST.

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