Can we use ITC to pay off Additional Liability in GST Annual Return?

Can we use ITC to pay off Additional Liability in GST Annual Return?

Through this article let us discuss if we can pay off Additional Liability in GST Annual Return by using Input Tax Credit.

Instruction Number 9 of Annual Return Form:

Towards the end of the return, taxpayers shall be given an option to pay any additional liability declared in this form, through FORM DRC-03. Taxpayers shall select ?Annual Return? in the drop down provided in FORM DRC-03. It may be noted that such liability can be paid through electronic cash ledger only.

As per this Instruction we cannot make payment of Additional Liability arising in GST Annual Return via Input Tax Credit Ledger, and it should be only paid in Cash. If we carefully study various provisions of the act, this instruction is not justified.

As per Section – 49, Central Goods And Services Tax Act, 2017 the amount available in the electronic credit ledger may be used for making any payment towards output tax under this CGST Act or under the IGST Act at the option of the Taxpayer. The Act or the Rules do not place any restriction on utilizing input tax credit for discharging the additional tax liability.

There is a restriction that interest or Penalty is paid in cash, but there is no restriction on additional tax.

Also input tax credit is one of the pillar of GST, taking away right of utilization of ITC would be a major hit on back bone of GST.

Creating a simple instruction cannot override the act, thus the Format of GST return can be legally challenged.

Do share your views on the same.

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