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🏦 Ledgers — GST Reference Notes

IndIaTaxSim · indiataxsim.com · Free Study Materials · For educational use only
1. The Three Electronic Ledgers

Every GST-registered taxpayer has three ledgers maintained digitally on the GST portal:

LedgerFull NameCredited ByDebited ByHead-specific?
Cash LedgerElectronic Cash LedgerChallan paymentsTax payment in GSTR-3B; interest; late feeYES (IGST/CGST/SGST/Cess heads)
Credit LedgerElectronic Credit LedgerGSTR-2B ITCITC used to offset output taxYES (IGST/CGST/SGST/Cess heads)
Liability RegisterElectronic Liability RegisterOutput tax from GSTR-3B 3.1Paid via ITC + CashTracks net liability
ℹ️ Note
The Cash Ledger and Credit Ledger maintain separate balances for IGST, CGST, SGST, and Cess. You cannot use CGST cash to pay SGST liability and vice versa. This is a critical rule — cross-utilisation is NOT permitted for CGST and SGST cash payments.
2. Electronic Cash Ledger — Detailed Rules

The Cash Ledger is your "GST bank account" funded exclusively by challans. Key rules:

•Balance is maintained head-wise: IGST, CGST, SGST, CESS (4 separate buckets)
•Excess balance in one head cannot be transferred to another head automatically
•However, IGST excess can be used to pay CGST and SGST (through the setoff order)
•Refund of excess Cash Ledger balance: via RFD-01 → "Excess Balance in Cash Ledger" category
•NEFT/RTGS payments reflect in 1 working day; Net Banking is instant
3. Electronic Credit Ledger — Detailed Rules

The Credit Ledger accumulates ITC from GSTR-2B. Rules:

•Credited automatically when GSTR-2B is generated (monthly on 14th)
•ITC can only be claimed for business purposes (not personal use)
•ITC on blocked items (Section 17(5)) should never be entered in GSTR-3B Section 4
•Excess ITC (when credit > liability) accumulates — can be refunded if eligible (zero-rated supplies or inverted duty structure)
•ITC reversal reduces the Credit Ledger balance
ITC Setoff Order (Section 49 — priority rules):
Use This ITCTo Pay This TaxPriority
IGST creditIGST1st — always use IGST ITC for IGST first
IGST creditCGST2nd — after IGST liability is settled
IGST creditSGST3rd — after CGST is settled
CGST creditCGSTOnly this — cannot cross to SGST
SGST creditSGSTOnly this — cannot cross to CGST
4. ITC Reversal Scenarios
ScenarioReversal RuleWhen to ReverseCan Re-Claim?
Goods used for personal/non-businessRule 42Same period as usageNo
Supplier's GSTIN cancelled—Immediately on noticeOnly if supplier re-registers and pays tax
Invoice not paid within 180 daysSection 16(2)In the period when 180 days completeYES — after payment is made to supplier
Goods used for exempt suppliesRule 42Proportional reversal annuallyPartial (for taxable portion)
Capital goods used for exempt suppliesRule 43Proportional over useful lifePartial
Blocked credit wrongly claimedSection 17(5)When error is foundNo
5. Electronic Liability Register

The Liability Register shows what you OWE to the government after GSTR-3B is filed. It is debited (reduced) as you pay through ITC and Cash Ledger. A negative balance in the Liability Register means you over-paid in a previous period — this appears as "Negative Liability" and is automatically carried forward as a credit to the next period's GSTR-3B.

6. RCM Liability and ITC Statement

This statement tracks:

•Column 1: RCM tax declared in GSTR-3B Section 3.1(b) (you PAID as buyer under RCM)
•Column 2: RCM ITC claimed in GSTR-3B Section 4(A)(2/3) (you CLAIMED back as ITC)

Both should ideally match. If you pay RCM but forget to claim ITC in the same period, the ITC is available in a later period subject to Section 16(4) time limits.

❓ Problem
Firm A has CGST cash balance ₹10,000 and SGST cash balance ₹2,000. CGST liability = ₹10,000, SGST liability = ₹10,000. Is SGST liability fully payable?
✅ Solution
NO. CGST cash (₹10,000) can only pay CGST liability (₹10,000) — CGST is fully settled.
SGST liability = ₹10,000 but SGST cash = only ₹2,000.
Remaining SGST liability = ₹8,000 cannot be paid from CGST cash.
Firm A must deposit an additional ₹8,000 into the SGST head of the Cash Ledger before GSTR-3B can be filed.
❓ Problem
A taxpayer claimed ITC of ₹30,000 in October on an invoice from a supplier. The supplier's invoice amount was ₹2,00,000 + ₹36,000 GST (18%). The taxpayer has not paid the supplier as of 31 March (5 months after October). What happens?
✅ Solution
Under Section 16(2), ITC must be reversed if payment is not made to the supplier within 180 days of invoice date. 5 months = 150 days — still within 180 days, so no reversal is needed yet. However, if payment is not made within 180 days (by approximately mid-April), the entire ₹36,000 ITC must be reversed by adding it to output tax liability. Once the taxpayer pays the supplier, the ITC of ₹36,000 can be re-claimed in the period of payment.
✏️ MCQ Practice — 50 Questions
1.The three electronic ledgers maintained by every registered taxpayer are:
(A) Cash Ledger, Credit Ledger, Liability Ledger (B) Tax Ledger, Input Ledger, Output Ledger (C) IGST Ledger, CGST Ledger, SGST Ledger (D) Debit Ledger, Credit Ledger, Asset Ledger
2.The Electronic Cash Ledger is credited when:
(A) Supplier files GSTR-1 (B) Taxpayer deposits money via challan (CIN) (C) ITC is claimed in GSTR-3B (D) GSTR-3B is filed
3.The Electronic Credit Ledger (ITC Ledger) is credited when:
(A) Challan is paid (B) ITC is claimed in GSTR-3B Section 4 (C) GSTR-1 is filed (D) Annual return is filed
4.The Electronic Liability Ledger shows:
(A) All ITC available (B) All tax, interest, late fee, and penalty payable by the taxpayer (C) Cash balance available (D) Bank account balance
5.Cash Ledger in GST has how many sub-heads?
(A) 3 (IGST, CGST, SGST) (B) 5 (IGST, CGST, SGST/UTGST, CESS, and Interest) (C) Multiple heads per tax: Tax, Interest, Penalty, Fee, Others — for each of IGST, CGST, SGST, CESS (D) Only 1 consolidated head
6.Can CGST cash balance be used to pay SGST liability?
(A) Yes, always (B) No — Cash Ledger balances are head-specific and cannot be cross-utilized between CGST and SGST (C) Yes, if SGST balance is zero (D) Yes, with officer permission
7.ITC (Credit Ledger) can be used to pay which of the following?
(A) Late fee (B) Penalty (C) Tax liability (IGST, CGST, SGST) as per setoff rules (D) Interest
8.Late fee in GST can be paid only from:
(A) Credit Ledger (B) Cash Ledger — under the Fee head (C) Either Cash or Credit Ledger (D) Liability Ledger
9.Interest on late tax payment must be paid from:
(A) Credit Ledger (ITC) (B) Cash Ledger only (under Interest sub-head) (C) Either ledger (D) Penalty head
10.Penalty in GST is paid from:
(A) Credit Ledger (B) Cash Ledger — Penalty sub-head (C) Either ledger (D) Bank directly to government
11.The Electronic Credit Ledger balance can go negative:
(A) Yes — excess reversal reduces it below zero (B) No — it can only be zero or positive (C) Only if officer orders it (D) Only for IGST head
12.IGST ITC is used to first offset which liability?
(A) CGST first (B) IGST first, then CGST, then SGST (C) SGST first (D) Equally across all heads
13.CGST ITC can offset which liabilities?
(A) CGST and IGST (not SGST) (B) Only CGST (C) CGST and SGST (D) All heads equally
14.SGST ITC can offset which liabilities?
(A) Only SGST (B) SGST and IGST (not CGST) (C) SGST and CGST (D) All heads
15.When a taxpayer's IGST ITC is more than IGST liability, the surplus IGST ITC is applied to:
(A) Refunded immediately (B) CGST liability first, then SGST (C) SGST first, then CGST (D) Carried forward only
16.A challan (CPIN) is valid for payment for how many days from generation?
(A) 3 days (B) 7 days (C) 15 days (D) 30 days
17.CIN (Challan Identification Number) is generated after:
(A) CPIN is created (B) Successful bank payment and bank confirms to GSTN (C) GSTR-3B is filed (D) ITC is claimed
18.Which type of payment cannot be made from the Cash Ledger?
(A) Tax payable (B) Late fee (C) ITC reversal repayment (D) There is nothing that cannot be paid from Cash Ledger — it covers all heads
19.The ITC carried forward from one period to the next is shown in:
(A) Cash Ledger (B) Credit Ledger — closing balance rolls over automatically (C) Liability Ledger (D) GSTR-2B
20.ITC reversal under the 180-day rule reduces the balance of:
(A) Cash Ledger (B) Liability Ledger (C) Credit Ledger (ITC is removed/reversed) (D) GSTR-1 outward data
21.After reversing ITC for non-payment within 180 days, when can the ITC be re-availed?
(A) Never (B) When the supplier files GSTR-1 (C) When the invoice is actually paid — re-avail in the period of payment (D) After 1 year
22.Which of the following will credit the Electronic Cash Ledger?
(A) Filing GSTR-3B (B) Generating a CPIN (C) Successful payment of challan (bank confirms CIN) (D) Supplier uploading invoices in GSTR-1
23.The Liability Ledger in IndIaTaxSim is debited when:
(A) Tax is deposited via challan (B) GSTR-3B is filed and tax liability is declared (C) ITC is claimed (D) GSTR-1 is filed
24.Negative liability in the Cash Ledger means:
(A) The taxpayer owes money to the government (B) Excess cash deposited — can be used for future liabilities or refund claimed (C) An error in GSTR-3B filing (D) Penalty is applicable
25.PMT-09 is used for:
(A) Filing a grievance for challan (B) Transferring balance between heads within the Cash Ledger (e.g., from CGST to SGST tax head) (C) Generating a new challan (D) Claiming ITC refund
26.The ITC adjustment for capital goods (apportionment between exempt and taxable use) is governed by:
(A) Rule 36 (B) Rule 43 — annual proportionate ITC reversal for capital goods (C) Section 17(5) (D) Rule 42
27.Rule 42 deals with ITC reversal for:
(A) Capital goods (B) Inputs and input services used partly for exempt / non-business use (C) 180-day non-payment rule (D) Blocked credits
28.A taxpayer can claim a refund of unutilized ITC (excess in Credit Ledger) when:
(A) At any time by filing RFD-01 (B) Only when exports exceed imports (C) In case of zero-rated supplies (exports/SEZ) or inverted duty structure (D) After 5 years of accumulation
29.The statement of ITC availment, utilisation, and reversal for a financial year is filed in:
(A) GSTR-3B Section 4 (B) GSTR-9 Part II Tables 6 and 7 (C) GSTR-2A (D) GSTR-1 HSN summary
30.Balance in the CGST Cash Ledger can be transferred to IGST Cash Ledger via:
(A) Automatic setoff (B) PMT-09 reallocation (C) GSTR-3B amendment (D) Officer approval only
31.Which ledger balance CANNOT be refunded directly without a specific condition?
(A) Cash Ledger balance (tax head) (B) Credit Ledger balance — refund of ITC requires specific condition like exports or inverted duty (C) Liability Ledger (D) Interest Ledger
32.A taxpayer has ₹1,00,000 CGST ITC and ₹80,000 CGST liability. The remaining ₹20,000 CGST ITC can be used to:
(A) Pay SGST liability (B) Pay IGST liability only (C) Is carried forward for future CGST or IGST liabilities (not SGST) (D) Is lapsed at year end
33.Electronic Liability Ledger auto-creates entries from:
(A) Challan deposits (B) GSTR-3B / return filings, orders, and officer demands (C) GSTR-2B supplier data (D) Invoice level uploads
34.Provisional ITC available in Credit Ledger before GSTR-2B generation:
(A) Can be freely claimed (B) As of current rules, no provisional ITC — 100% from GSTR-2B only (C) 10% above GSTR-2B allowed (old Rule 36(4)) (D) Is automatically reversed
35.Cash deposited for the "Others" head in the Cash Ledger can be used for:
(A) Tax liability only (B) Only interest (C) Only penalties (D) Any liability within the same tax type (IGST/CGST/SGST)
36.A challan for ₹50,000 IGST tax was created but the bank payment was not made within 15 days. What happens?
(A) Challan auto-paid (B) Challan expires — a new challan must be generated (C) Amount debited from bank automatically (D) Penalty of 10% applied
37.Refund of excess cash from the Cash Ledger is applied in form:
(A) PMT-06 (B) RFD-01 (C) PMT-09 (D) GST REG-21
38.ITC transferred from head office to branch office via ISD is reflected in the branch's:
(A) Cash Ledger (B) Credit Ledger — as ISD ITC in GSTR-2B Part A3 (C) Liability Ledger (D) GSTR-1
39.When filing GSTR-3B, the tax is paid by debiting which ledgers (in order)?
(A) Liability Ledger first, then Credit Ledger (B) Credit Ledger first (ITC), then Cash Ledger for remaining liability (C) Cash Ledger first, then Credit Ledger (D) No specific order — taxpayer chooses
40.The ITC on capital goods is available:
(A) Spread over 5 years at 20% per year (B) Fully in the first month of purchase (C) Only after the asset is fully installed (D) Equally spread over the asset's useful life
41.Section 49 of CGST Act governs:
(A) Registration threshold (B) ITC eligibility (C) Payment of tax — electronic ledgers and their use (D) Annual return filing
42.Which ledger reflects the e-Cash balance that can be used immediately?
(A) Liability Ledger (B) Electronic Cash Ledger (C) Credit Ledger (D) GSTR-3B Tax Paid section
43.ITC claimed in GSTR-3B but later found inadmissible due to non-filing by supplier is:
(A) Automatically reversed by GSTN (B) Subject to DRC-01C and taxpayer must reverse voluntarily (C) Retained with no action needed (D) Offset against future eligible ITC
44.Excess ITC in Credit Ledger at the end of a financial year (unutilized) is:
(A) Lapsed — not carried forward (B) Refunded automatically (C) Carried forward to next year indefinitely (subject to conditions) (D) Transferred to Cash Ledger
45.A negative balance in the Liability Ledger indicates:
(A) The taxpayer owes money (B) Excess tax paid — credit available for next return period (C) Error in GSTR-1 (D) Blocked ITC
46.Online payment modes available in GST include:
(A) Internet banking, NEFT, RTGS, over-the-counter (bank) (B) Only internet banking (C) Only NEFT (D) Debit/credit card via Razorpay only
47.Over-the-counter cash payment at bank for GST challan is limited to:
(A) ₹50,000 per challan (B) ₹10,000 per challan (C) ₹1,00,000 per challan (D) No limit
48.Track Payment Status after making a challan payment uses:
(A) CPIN number (B) CIN number provided by bank (C) GSTIN of taxpayer (D) Invoice number
49.PMT-07 is filed when:
(A) Excess cash needs to be transferred between heads (B) There is a discrepancy between CPIN-linked payment and GSTN credit (grievance for failed payment) (C) ITC refund is requested (D) GSTR-3B is nil
50.In IndIaTaxSim, the Ledger Balance Dashboard shows:
(A) Only ITC balance (B) Cash Ledger + Credit Ledger + Liability Ledger balances across all heads for active GSTIN (C) Only the Cash Ledger (D) GSTR-3B tax paid summary
Answer Key
1–A 2–B 3–B 4–B 5–C 6–B 7–C 8–B 9–B 10–B 11–B 12–B 13–A 14–B 15–B 16–C 17–B 18–D 19–B 20–C 21–C 22–C 23–B 24–B 25–B 26–B 27–B 28–C 29–B 30–B 31–B 32–C 33–B 34–B 35–D 36–B 37–B 38–B 39–B 40–B 41–C 42–B 43–B 44–C 45–B 46–A 47–A 48–B 49–B 50–B
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