Can we pay GST penalty from cash ledger amount?

Yes, you can pay GST penalties using funds from your cash ledger. However, the penalty amount must first be transferred to the designated penalty account. This is done by filing a specific payment form (PMT-9). Once transferred, you can then make the adjustment to pay the penalty. Importantly, GST penalties and interest can only be paid from the cash ledger, not from your Input Tax Credit (ITC) ledger.