What is the Process of Paying the GST Tax Liability Online?


Date: 27 Jan 2023

Payments and Refunds under GST 


The rules for the payment of GST require an individual or a business to fill GSTR-3B to report the ITC, along with GSTR-1 to enumerate sales. The refund can also be claimed by filing the necessary documents. 



What payments are to be made under GST?

The GST paid can be classified into three different taxes:

  • IGST is paid to the centre in the case of interstate supply 

  • CGST is paid to the centre of the supply is within the state 

  • SGST is paid to the state in case the supply is within the state 


There are other types of taxes, excluding the ones mentioned above, that a taxpayer is liable to pay:

  • TDS is another payment that the dealer subtracts before paying the supplier. 

For example, if a dealer is acquiring services at 1,00,000, he will deduct a certain amount. Let's assume it is TDS @ 1% (10,000) then, he is to pay the supplier after deducting the said amount. 

  • TCS refers to the phenomenon where any dealer using any e-commerce platform receives payment after 2% of a certain amount is claimed as tax collected at the source.

  • Reverse Charge Mechanism- Another tax that a tax-paying individual is required to pay is a tax paid under the reverse charge mechanism, where the recipient of a certain service is liable to pay tax on the said service. 

  • Interests, penalties, fees and other payments 



How to calculate the GST payment to be made?

To calculate the total GST payment, the Input Tax Credit should be subtracted from the Outward Tax Liability. TDS/TCS will be deducted from the total GST to determine the net payable amount. The final amount will include interest and late fees (if applicable).


The ITC is different for different dealers, such as:

  • Regular dealer- A regular dealer must pay GST on his outward supplies and can claim Input Tax Credit (ITC) on his purchases. The difference between the outward tax liability and the ITC is the GST payable by a regular dealer.

  • Composition dealer- A dealer who has chosen the composition scheme must pay a fixed percentage of GST on all outward supplies. A composition dealer must pay GST based on the nature of his or her business.


Who should make the payment and when?

These dealers are required to make GST payments –

  • If GST liability exists, a registered dealer is expected to make the payment 

  • A registered dealer who is liable to pay under Reverse Charge Mechanism (RCM)

  • TCS is to be paid and collected by an e-commerce operator 

  • Dealers who are liable to deduct TDS

GST payment is made by the 20th of the next month by filing GSTR 3 


What are electronic ledgers?


These ledgers are maintained electronically on the GST website. 


How to make GST payments?

The payment can be made in the following two ways:

  • Payment through credit ledger

Dealers can use their ITC credit to pay their GST. The credit can only be used to pay taxes. ITC cannot be used to pay interest, penalties, or late fees.

  • Payment through cash ledger 

GST can be paid online or in person. The challan must be generated on the GST Portal for online and offline payments. It is mandatory to pay taxes online if the tax liability exceeds Rs 10,000.


Note- If GST is underpaid, unpaid, or paid late, the dealer must pay interest at 18%. There is also a penalty to be paid. The penalty is the greater of Rs. 10,000 or 10% of the tax short-paid or unpaid.



What is a GST refund?

When the GST paid exceeds the GST liability, the situation of claiming a GST refund arises. The process of claiming a refund under GST is standardised to avoid confusion. The process is done online, and time limits have been set.


When can the refund be claimed?

There are numerous situations in which a refund can be obtained. Here are a few examples: Excess tax is paid due to an error or omission.

  • Dealer Exports (including deemed export) goods/services under claim of rebate or Refund

  • ITC accumulation due to output being tax-exempt or nil-rated

  • Refund of tax paid on purchases made by Embassies or UN bodies

  • Tax Refund for International Tourists

  • Finalization of provisional assessment


How to calculate a GST refund?

Consider the simple case of an overpayment of taxes. For the month of September, Mr B's GST liability is Rs 50000. Mr B, on the other hand, made a GST payment of Rs 5 lakh by mistake. Mr B has now made an excess GST payment of Rs 4.5 lakh, which he can claim as a refund. The refund must be claimed within two years of the date of payment.


What is the time limit for claiming the refund?

The deadline for requesting a refund is two years from the relevant date. In each case, the relevant date is different. For some cases, the relevant dates are as follows:


Reason for claiming GST Refund Relevant Date
Excess payment of GST Date of Payment
Export or deemed export of goods and services Date of dispatch/loading/passing the frontier
ITC accumulated as output tax which is exempted from tax or nil-rated Last date of the financial year to which the credit belongs
Finalisation of provisional assessment The date on which tax is adjusted


How to claim a GST refund?

The refund application must be submitted in Form RFD 01 within two years of the relevant date. A Chartered Accountant should also sign the form.