The Goods and Services Tax (GST) system in India has two important terms every business owner should know — GST Payable and GST Credit.
-
GST Payable means the tax you owe to the government on your sales.
-
GST Credit (Input Tax Credit) allows you to claim credit for the GST you already paid on purchases.
When you understand the balance between GST Payable and Credit, you can reduce tax liability, improve compliance, and strengthen business cash flow.
What is GST Payable?
GST Payable is the total tax collected from customers on sales. Businesses are responsible for depositing this amount with the government after adjusting eligible credits.
Example:
If you sell goods worth ₹1,00,000 and charge 18% GST, your GST Payable is ₹18,000.
This is not your income — it is tax collected on behalf of the government.
What is GST Credit?
GST Credit, or Input Tax Credit (ITC), is the GST you paid on inputs (purchases, raw materials, or services) that can be used to offset your GST Payable.
Example:
If you paid ₹10,000 GST on purchases, you can deduct it from your total payable GST.
✅ GST Payable vs. GST Credit – Key Difference
| Aspect | GST Payable | GST Credit |
|---|---|---|
| Definition | Tax collected from customers to be paid to the government | Tax already paid on inputs that can be adjusted against GST payable |
| Nature | Liability | Asset (benefit to reduce tax) |
| Example | Output GST on sales | Input GST on raw materials |
| Purpose | Revenue for government | Relief for businesses |
How GST Payable and Credit Work Together
Let’s see how they balance:
-
Calculate GST on Sales (GST Payable).
-
Calculate GST paid on Purchases (GST Credit).
-
Adjust the two:
Example:
-
GST on Sales: ₹18,000
-
GST Paid on Purchases: ₹10,000
-
Net GST Payable = ₹8,000
This ensures businesses don’t pay tax twice.
Benefits of Proper GST Credit Utilization
-
Lower Tax Burden: Reduces net GST payable.
-
Cash Flow Efficiency: Keeps working capital free.
-
Transparency: Ensures businesses don’t suffer tax-on-tax.
-
Compliance Friendly: Helps avoid penalties and interest.
Common Issues Businesses Face
-
Suppliers not filing GST returns → leads to blocked credit.
-
Claiming ineligible expenses as credit.
-
Delay in filing GSTR-3B → interest charged on GST payable.
-
Not reconciling purchase data with GSTR-2B.
Conclusion:
Every business must calculate GST Payable and Credit accurately to stay compliant. Proper credit management reduces liability, prevents errors, and strengthens financial health.
👉 Need professional help to manage GST Payable and Credit? Contact us today for expert assistance.