Section 49 is the payment machinery of GST. Cash goes into an electronic cash ledger, self-assessed credit into an electronic credit ledger, and liabilities into a liability register. The section fixes how credit of each tax may be used against which tax, the order in which dues are paid, and presumes that tax paid was passed on to the customer.
Key points
- Under section 49 of the CGST Act, 2017 deposits are credited to the electronic cash ledger and self-assessed input tax credit to the electronic credit ledger; the cash ledger may pay any amount, the credit ledger only output tax.
- IGST credit is used first for IGST and then for CGST and SGST; CGST credit for CGST and then IGST; SGST credit for SGST and then IGST — but never CGST credit for SGST or the reverse (section 49(5)), and IGST credit must be exhausted first (section 49A, Rule 88A).
- Dues are discharged in a fixed order: earlier periods' self-assessed tax and dues, then the current period's, then demands (section 49(8)).
- Every person who has paid GST is presumed, unless the contrary is proved, to have passed on its full incidence to the recipient (section 49(9)) — the basis of the unjust-enrichment bar on refunds.
- Cash ledger balances may be transferred between tax heads and, from 05.07.2022, to a distinct person with the same PAN (section 49(10)); the Government may cap the share of output tax paid through credit (section 49(12)) — Rule 86B requires at least 1% in cash for taxable supplies above Rs. 50 lakh a month, with exceptions.
The provisions
49(1)–(4)Cash and credit ledgers
Statutory text
(1) Every deposit made towards tax, interest, penalty, fee or any other amount by a person by internet banking or by using credit or debit cards or National Electronic Fund Transfer or Real Time Gross Settlement or by such other mode and subject to such conditions and restrictions as may be prescribed, shall be credited to the electronic cash ledger of such person to be maintained in such manner as may be prescribed.
(2) The input tax credit as self-assessed in the return of a registered person shall be credited to his electronic credit ledger, in accordance with 1[section 41 2[***]], to be maintained in such manner as may be prescribed.
(3) The amount available in the electronic cash ledger may be used for making any payment towards tax, interest, penalty, fees or any other amount payable under the provisions of this Act or the rules made thereunder in such manner and subject to such conditions and within such time as may be prescribed.
(4) The amount available in the electronic credit ledger may be used for making any payment towards output tax under this Act or under the Integrated Goods and Services Tax Act in such manner and subject to such conditions 3[and restrictions] within such time as may be prescribed.
* Enforced w.e.f. 22nd June, 2017.
1. Substituted by s. 20 of The Central Goods and Services Tax (Amendment) Act, 2018 for "section 41". This amendment, not yet enforced.
2. Omitted (w.e.f. 1st October, 2022 vide Notification No. 18/2022 - CT dated 28.09.2022) by s. 110 of The Finance Act 2022 (No. 6 of 2022).
3. Inserted (w.e.f. 1st October, 2022 vide Notification No. 18/2022 - CT dated 28.09.2022) by s. 110 of The Finance Act 2022 (No. 6 of 2022).
- Rules 85–87, CGST Rules — liability register, credit ledger, cash ledger
- Rule 86A — blocking of credit
49(5)Order of using credit
Statutory text
(5) The amount of input tax credit available in the electronic credit ledger of the registered person on account of-
(a) integrated tax shall first be utilised towards payment of integrated tax and the amount remaining, if any, may be utilised towards the payment of central tax and State tax, or as the case may be, Union territory tax, in that order;
(b) the central tax shall first be utilised towards payment of central tax and the amount remaining, if any, may be utilised towards the payment of integrated tax;
(c) the State tax shall first be utilised towards payment of State tax and the amount remaining, if any, may be utilised towards payment of integrated tax
4[Provided that the input tax credit on account of State tax shall be utilised towards payment of integrated tax only where the balance of the input tax credit on account of central tax is not available for payment of integrated tax;];
(d) the Union territory tax shall first be utilised towards payment of Union territory tax and the amount remaining, if any, may be utilised towards payment of integrated tax:
5[Provided that the input tax credit on account of Union territory tax shall be utilised towards payment of integrated tax only where the balance of the input tax credit on account of central tax is not available for payment of integrated tax;]
(e) the central tax shall not be utilised towards payment of State tax or Union territory tax; and
(f) the State tax or Union territory tax shall not be utilised towards payment of central tax.
4. Inserted by s. 20 of The Central Goods and Services Tax (Amendment) Act, 2018 - Brought into force w.e.f. 01-02-2019.
5. Inserted by s. 20 of The Central Goods and Services Tax (Amendment) Act, 2018 - Brought into force w.e.f. 01-02-2019.
What it means
IGST credit pays IGST first and then CGST and SGST/UTGST; CGST credit pays CGST and then IGST; SGST/UTGST credit pays SGST/UTGST and then IGST, but only after CGST credit is exhausted for IGST (provisos to clauses (c) and (d), from 01.02.2019). CGST and SGST credits never cross. Under section 49A and Rule 88A (from 29.03.2019), IGST credit must be used in full — against IGST, then CGST and SGST in any order and proportion — before CGST or SGST credit is used. The cross-utilisation is settled between governments under section 53.
- Rule 88A, CGST Rules; Circular 98/17/2019-GST
49(6)–(9)Refund of balance; liability register; order of dues; incidence
Statutory text
(6) The balance in the electronic cash ledger or electronic credit ledger after payment of tax, interest, penalty, fee or any other amount payable under this Act or the rules made thereunder may be refunded in accordance with the provisions of section 54.
(7) All liabilities of a taxable person under this Act shall be recorded and maintained in an electronic liability register in such manner as may be prescribed.
(8) Every taxable person shall discharge his tax and other dues under this Act or the rules made thereunder in the following order, namely:-
(a) self-assessed tax, and other dues related to returns of previous tax periods;
(b) self-assessed tax, and other dues related to the return of the current tax period;
(c) any other amount payable under this Act or the rules made thereunder including the demand determined under section 73 or section 74 8[or section 74A].
(9) Every person who has paid the tax on goods or services or both under this Act shall, unless the contrary is proved by him, be deemed to have passed on the full incidence of such tax to the recipient of such goods or services or both.
8. Inserted by section 125 of The Finance Act (No. 2) Act, 2024 No. 15 of 2024 dated 16.08.2024.
What it means
A balance in either ledger may be refunded under section 54 — for the cash ledger, at any time; for the credit ledger, only in the cases section 54(3) allows. Sub-section (8) fixes the order of discharge: past self-assessed dues, then current, then any other amount including demands under sections 73, 74 and 74A.
Sub-section (9) presumes that whoever paid the tax passed its full incidence on to the recipient. It is rebuttable — the payer must prove it bore the tax itself — and it underpins the unjust-enrichment test in section 54(4) and (8). It reproduces section 12B of the Central Excise Act, 1944, whose validity the Supreme Court upheld.
Case on this provision
Mafatlal Industries Ltd v Union of India
(1997) 5 SCC 536 · 19.12.1996 · Supreme Court, 9 Judges (majority 8:1; lead opinion B.P. Jeevan Reddy J.)
- Facts
- Manufacturers and importers sought refunds of excise and customs duty they said had been collected without authority of law, by suits, writ petitions and claims under the Acts. They challenged the 1991 amendments that subjected all refunds to the doctrine of unjust enrichment, including section 12B of the Central Excise Act, which presumed that the incidence of duty had been passed on to the buyer.
- Held
- By majority, claims for refund of duty collected under the Act, even by misconstruction, must be made under the Act's own refund provision; the 1991 amendments are valid; and refund is denied where the burden of the duty has been passed on, since the claimant would then be unjustly enriched. The presumption in section 12B is valid, rebuttable, and applies to pending proceedings. Only where a levy is struck down as unconstitutional does a claim fall outside the Act — and even then unjust enrichment applies.
- Since then
- The scheme carried into GST: section 49(9) restates the presumption, and section 54(4), (5) and (8) route refunds not passed on to the claimant and others to the Consumer Welfare Fund.
- Here
- A taxpayer seeking a refund of tax must rebut the presumption in sub-section (9) — typically by showing the tax was not recovered from the customer and was borne as a cost — unless the refund falls in a category exempted from the unjust-enrichment test by section 54(8).
49(10)–(12)Transfers; cap on payment through credit
Statutory text
7[6[(10) A registered person may, on the common portal, transfer any amount of tax, interest, penalty, fee or any other amount available in the electronic cash ledger under this Act, to the electronic cash ledger for,––
(a) integrated tax, central tax, State tax, Union territory tax or cess; or
(b) integrated tax or central tax of a distinct person as specified in sub-section (4) or, as the case may be, sub-section (5) of section 25, in such form and manner and subject to such conditions and restrictions as may be prescribed and such transfer shall be deemed to be a refund from the electronic cash ledger under this Act:
Provided that no such transfer under clause (b) shall be allowed if the said registered person has any unpaid liability in his electronic liability register.]
(11) Where any amount has been transferred to the electronic cash ledger under this Act, the same shall be deemed to be deposited in the said ledger as provided in subsection (1).]
3[(12) Notwithstanding anything contained in this Act, the Government may, on the recommendations of the Council, subject to such conditions and restrictions, specify such maximum proportion of output tax liability under this Act or under the Integrated Goods and Services Tax Act, 2017 which may be discharged through the electronic credit ledger by a registered person or a class of registered persons, as may be prescribed]
Explanation.-For the purposes of this section,-
(a) the date of credit to the account of the Government in the authorised bank shall be deemed to be the date of deposit in the electronic cash ledger;
(b) the expression,-
(i) "tax dues" means the tax payable under this Act and does not include interest, fee and penalty; and
(ii) "other dues" means interest, penalty, fee or any other amount payable under this Act or the rules made thereunder
7. Inserted by s. 99 of the Finance (No. 2) Act, 2019 - Brought into force w.e.f. 01-01-2020 vide Notification No. 1/2020-C.T., dated 01-01-2020.
6. Substituted by s. 110 of The Finance Act 2022 (No. 6 of 2022) - Brought into force w.e.f. 05-07-2022 vide Notification No. 9/2022-C.T, dated 05-07-2022.
What it means
From 01.01.2020 a registered person may transfer a cash ledger balance between IGST, CGST, SGST, UTGST and cess heads (Form PMT-09); from 05.07.2022 it may also transfer IGST or CGST balances to a distinct person registered under the same PAN, provided it has no unpaid liability. A transfer is treated as a refund from the transferor's ledger and a deposit in the transferee's.
Sub-section (12), from 01.10.2022, gives statutory backing to Rule 86B (in force since 01.01.2021): a registered person whose taxable supplies (other than exempt and zero-rated) exceed Rs. 50 lakh in a month may discharge no more than 99% of output tax through credit. It does not apply to Government departments and public sector undertakings, or to a person (or its proprietor, partners or directors) who paid income tax above Rs. 1 lakh in each of the last two years, received refunds above Rs. 1 lakh of unutilised credit, or has paid more than 1% of output tax in cash in the year so far.
- Rule 87(14) — Form PMT-09
- Rule 86B — 99% cap (Notification 94/2020-Central Tax, from 01.01.2021)
Statutory text as published on the CBIC tax information portal, as on 03.10.2026; the numbered notes record each amendment. Official source
Common questions
- Can CGST credit be used to pay SGST?
- No. Section 49(5)(e) and (f) of the CGST Act bar CGST credit against SGST and SGST credit against CGST. Each can be used against IGST, and IGST credit can pay all three — but must be used up first (section 49A).
- Can interest or late fee be paid from the credit ledger?
- No. The electronic credit ledger may be used only for output tax (section 49(4)); interest, late fee and penalty must be paid from the cash ledger.
- What is Rule 86B?
- It requires a registered person with taxable supplies above Rs. 50 lakh in a month to pay at least 1% of output tax in cash, with exceptions such as income tax paid above Rs. 1 lakh in each of the last two years. Section 49(12) supports it from 01.10.2022.
Commentary and case notes checked against the judgments and CBIC sources on 04.10.2026.
What it means
Deposits are made through Form PMT-06 and credited to the cash ledger on the date the amount reaches the Government's account in the authorised bank (Explanation (a)). The cash ledger can pay tax, interest, penalty, fee and other amounts; the credit ledger only output tax — so interest, late fee and penalty must be paid in cash.
The words "and restrictions" in sub-section (4), from 01.10.2022, support restrictions on using credit such as Rule 86A, under which an officer may block credit in the ledger that he has reason to believe was fraudulently availed or ineligible, for up to one year. The 2018 amendment noted in the CBIC text (note 1) referred to section 43A and was never brought into force; sub-section (2) operates by reference to section 41.