GST is all about transparency, simplicity, and growth. However, adopting digital technology is a must for all of these. This is why GST Model Law will ensure that the records of all the transactions, generated invoices, refunds, tax credits, etc. are maintained online. This resulted in the need of e-ledgers.
A taxable person who comes under GST regime has to create an account on the GST portal. Once this is done they will get access to three e-ledgers:
- e-cash ledger
- e-credit ledger
- e-liability ledger
But what are these ledgers, and how do they work? Let’s take a look at them, one at a time.
The e-cash ledger will reflect your payments towards tax, penalty, interest, etc. You can make these payments through any of the following modes:
- Debit or credit card
- Internet banking
- NEFT or RTGS
- Over the Counter (OTC) payment for amounts up to Rs. 10,000 in cash, or through DD or cheque
All the input credits under the main heads i.e. SGST, CGST, and IGST will be credited to the e-credit ledger. In other words- the total amount of tax payable will be reflected in this ledger. However, if you will claim refunds through input tax credits, the appropriate amount will be debited from it.
Note: you will be allowed to use the balance of this ledger for the payment of taxes only. For other payments such as interest, fee, etc. you will have to use e-cash ledger.
The e-liability ledger will reflect your tax liability for a particular month after final netting is done. It is also auto-populated.
To understand how all the 3 e-ledgers will work in reality, let’s consider an example:
- S is a supplier who has to file the GST return for a month. So, he/she will use the form GSTR 1 and add the details of outward supplies for the month.
- B is the buyer who will find the details of the supplied filed by S in the form GSTR 2a.
- S will check his/her e-ledger to find out their tax liability and the payment of the same. He/she will check the e-liability ledger for checking the tax amount liable to him and e-credit ledger to see if he/she has enough credits for the payment of CGST, SGST, and IGST. If there are, he/she will pay the taxes using the same. If not, then he/she will use the e-cash ledger to pay the taxes through any of the modes mentioned above.
Note: It seems there is no provision for cross adjustments in the GST scheme. So, you can pay CGST only from the CGST balance, IGST only from the IGST balance, and SGST only from the SGST balance in your e-credit ledger.
Summing it Up
To simplify the entire system:
- e-cash ledger is for recording your payments, taxes, fees, etc.
- e-credit ledger is for reflecting your SGST, CGST, and IGST credits available through ITC (Input Tax Credits) which you can also use for paying these taxes.
- e-liability ledger is for showing your tax liabilities in an easy and simple manner.
Understanding the working of all these three e-ledgers is important to move to the GST regime smoothly. If you have a strong grasp of the basics, that’s enough to get you going when the Goods and Services Tax is rolled out on 1st July.