PMT-02 explained: the electronic credit ledger

How the ledger works

Rule 86 of the CGST Rules provides for the electronic credit ledger in Form PMT-02. ITC self-assessed in GSTR-3B, credit distributed by an ISD, credit transferred in ITC-02 or ITC-02A, and credit claimed in ITC-01 is credited here. It is debited when you pay tax through GSTR-3B, when you claim a refund of unutilised ITC, or when ITC is reversed.

Order of utilisation

• IGST credit must be used first, against IGST and then against CGST and SGST in any proportion
• CGST and SGST credit can be used only after IGST credit is exhausted
• CGST credit pays CGST and IGST; it cannot pay SGST
• SGST credit pays SGST and IGST; it cannot pay CGST
• Cess credit pays only cess

What credit cannot be used for

Under Section 49(4), the credit ledger pays only output tax. Interest, late fee, penalty and tax payable under reverse charge must be paid in cash. A demand for tax can be paid from credit, but interest and penalty on it require cash.

Blocking and reversals

Under Rule 86A, an officer who has reasons to believe that credit was fraudulently availed or is ineligible can disallow its debit, which effectively blocks part of the ledger. The block lapses after one year unless lifted earlier. Credit reversed for temporary reasons and reclaimed later is tracked in a separate statement on the portal, so that reclaim does not exceed the amount reversed.

If the ledger balance looks wrong, report it through PMT-04. Where a refund debited from the ledger is rejected, the amount comes back through PMT-03.

Practical tips

Do not treat the ledger balance as safe money; a large credit balance with low output tax is often questioned in scrutiny, and exporters may be better off claiming a refund. A professional can review utilisation each month and respond if credit is blocked.

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This guide explains the law in general terms as of October 2026. Time limits and requirements can depend on the facts of your case and on the notice you received.