Payment of GST through DRC-03 using input tax credit balance

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Utilisation of the amounts available in the electronic credit ledger for payment of tax and other liabilities.

Payment of GST using DRC-03 using ITC balance

CBIC vide Circular No. 172/04/2022-GST dated 06th July 2022 issued clarification on this subject. 

Here is the text of the circular:

1.In  terms  of sub –section  (4)  of  section 49 of CGST Act, the amount available in the electronic credit ledger may be used for making any payment towards output tax under the CGST Act or the Integrated Goods   and   Services   Tax   Act,   2017(hereinafter referred to as “IGST Act”),subject  to  the  provisions  relating  to  the order of utilisation of input tax credit as laid  down  in  section  49B  of  the  CGST Act  read  with  rule  88A  of  the  CGST Rules. 

2.Sub-rule  (2)  of  rule  86  of  the  CGST Rules   provides for   debiting   of   the electronic  credit  ledger  to  the  extent  of discharge  of  any  liability  in  accordance with  the  provisions  of  section  49  or section 49A or section 49B of the CGST Act.

3.Further,   output   tax   in   relation   to   a taxable  person  (i.e.  a  person  who  is registered or liable to be registered under section  22  or  section  24  of  the  CGST Act) is defined in clause (82)of section 2 of the CGST Act as the tax chargeable on taxable supply of goods or services or both but excludes tax payable on reverse charge mechanism.

4.Accordingly,  it  is  clarified  that  any payment towards output tax, whether-
  • self-assessed in  the  return  or  
  • payable as  a  consequence  of  any  proceeding instituted under the provisions of GST Laws, 
can  be  made  by  utilization  of the amount available in the electronic credit ledger of a registered person.  In nutshell you can use ITC balance for paying tax using DRC-03 as well.

5.It is further  reiterated  that as output  tax does   not   include   tax   payable   under reverse   charge  mechanism, implying thereby  that  the  electronic  credit  ledger cannot  be  used  for  making  payment  of any  tax  which  is  payable  under  reverse charge mechanism (RCM).

Can we use ITC balance for paying interest, penalties etc?

ITC balance can not be used for making payment  of  any  interest,  penalty,  fees  or  any other  amount   payable   under   the   said   acts. 
Similarly,  electronic  credit  ledger  cannot  be used    for    payment    of    erroneous    refund sanctioned  to  the  taxpayer,  where  such  refund was sanctioned in cash.

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