Interest on delayed payment of GST now to be levied on 'Net Tax Liability' paid through electronic cash ledger
- GST law was introduced in India w.e.f. 1st July, 2017 which promulgated uniform indirect tax mechanism all over India. The whole idea was to bring 'One Nation One Tax' in the entire country. The Government launched GST portal which would provide a digital platform to all the taxpayers where they could file their GST returns online, claim set off of input taxes and pay net output tax through electronic cash ledger maintained on the GST portal.
- From the very first date, there was a controversy over the issue that "whether interest on delayed payment of GST will be paid on gross tax amount or on the net tax amount after set off ITC?"
- The taxpayers contended that interest on delayed payment of GST should be levied only on the net tax payable after ITC whereas the department contended that interest should be levied on the gross amount of tax. A number of litigations came over the legal domain on this issue and many are still pending. However, this controversy has now been settled after the much awaited notification by CBIC on 25th August, 2020.
- CBIC on 25th August, 2020 brought Notification No. 63/2020-CT to bring into effect amendment made vide Finance Act, 2019 through which a proviso was inserted in section-50 of CGST Act, 2017. This proviso has been made effective from 01st September, 2020.
- Provisio inserted to Section-50(1) reads as follows:-
"Provided that the interest on tax payable in respect of supplies made during a tax period and declared in the return for the said period furnished after due date in accordance with the provisions of Section-39, except where such return is furnished after commencement of any proceedings under section 73 or section 74 in respect of the said period, shall be levied on that portion of the tax that is paid by debiting the electronic cash ledger".
- The effect of this amendment is as follows:-
W.e.f. 01-09-2020, interest on delayed payment of GST shall be leviable only on the net amount of tax paid through electronic cash ledger. Suppose, the GST payable for the month of September, 2020 is Rs. 100,000 and ITC available is Rs. 40,000. Thus, the taxpayer will pay Rs. 60,000 (net) through cash ledger. Interest will be charged on Rs. 60,000 if the payment of GST is delayed by the taxpayer.
- Press Release of CBIC after 39th Meeting of GST Council on 14th March, 2020 stated that the GST Council has made the recommendation that "Interest for delay in payment of GST to be charged on the net tax liability w.e.f. 01-07-2017" i.e. retrospective effect. Therefore, amendment made above with prospective effect from 01-09-2020 is against the spirit of the decision of GST Council.
- The Government should look into this matter and come out with a suitable clarification.
Please also read our article related to this topic in which the Government has clarified its stand by way of a Press Release https://www.taxwink.com/blog/interest-on-delayed-payment-of-gst
