Validity of interest under GST Law for delay in Filing of Return

M.V.J.K. KUMAR*

Whether Levy Of Interest Under GST Act 2017 Is Valid And Whether The Levy Of Interest Should Be Levied For The Delay In Filing The Return, Is There Any Provision?

Levy of interest on belated payment has become a burning topic nowadays as interest levied under section 50(1) for not filing the return and paying the tax i.e. Form 3B in time. Here I would like to quote that Form 3B has not been specified in the Act under any of the section or rules and therefore it is not a return at all as held by the Gujarat High Court in the case of AAP & Co., Chartered Accountants Vs. Union of India reported in [2019] 75 GST 192 (Gujarat) where the department of Central GST, has said that it is not a return under any of the sections or rules of the GST Act 2017. As the Gujarat High Court has set aside Form 3B, there is no Form 3B under the Act.

When the Gujarat High Court has set aside the department has filed a Special Leave Petition before the Hon’ble Supreme Court and the Hon’ble Supreme Court has granted stay in the matter. Of course, it is not known to anyone whether the stay has been granted on filing of Form 3B or not. Be that as it may, the Union of India has thought it fit to insert by way of a Notification i.e. 49/2019 dated 09-10-2019 wherein the Union of India has specified Form 3B to be filed retrospectively.

It is not specified in the Notification that for the period 2017-18, till the notification is issued i.e. 09-10-2019, what is the date and time exactly given by the Union of India to file Form 3B as it has specified in the notification that it is giving a retrospective effect for filing Form 3B but has not specified any date for its filing.

Now the question is whether section 50(1) when specified the rate of interest as 18% would it be sufficient for the calculation of interest for not filing Form -3B and not paying the tax in time, as section 50(2) specifies that interest under sub section (1) shall be calculated in such manner as may be prescribed from the day succeeding the day on which such tax was due to be paid.

According to me, as sub section (1) clearly provides the rate of interest to be paid (not exceeding 18%) and sub section (2) when it refers to sub section (1) and says that levy of interest shall be calculated in such a manner as may be prescribed in sub section (1) then there is no necessary for any separate manner to be prescribed in the rules that would be formed by the executive.  More so, sub section (2) says that the interest is leviable from the day succeeding the day on which such tax was due to be paid. Therefore it is clear that interest is to be calculated from the day succeeding or corresponding day on which such tax that has to be paid by the due date has not been paid. Therefore it is clear that the interest has to be calculated in according with section 50(1) of the Act. There is no necessary for referring to any of the judgements laid down by the Hon’ble High Court or Apex Court on this issue when the section itself is very clear according to me. As levy of interest is automatic when the tax due has not been paid and articles 265 does not cover the interest portion. Of course when the tax is levied without jurisdiction and the interest levied thereon would be wholly unconstitutional and violative of Article 265.

It is also made clear that what is left is only the procedure to pay the interest and the procedure has been prescribed in Notification No. 13/2017 , Rule 37(3), Rule 61(3), Rule 62(2), Rule 85(1) and (2) & Rule 87) which rules clearly prescribes the manner or the procedure in which the interest has to be paid for various reasons by debiting the electronic credit ledger or cash ledger, hence therefore the procedure and calculation when it is prescribed in section 51 and correspondingly in rules, again saying that sub section (2) of section 50 in which the word prescribed has been mentioned, is not specified in the rules does not have any sense and doesn’t hold the field.

It is now how the interest is to be calculated and whether the interest shall be calculated on the gross amount or on the net amount is the question that fall for consideration. Though in Megha Engineering Case & Infrastructures Ltd Vs the Commissioner of Central Tax, Hyderabad reported in [2019] 73 GST  787, the Telangana High Court has said that the interest has to be calculated on gross amount and the Madras High Court has said in M/s. Retex Industries & Others Vs. Asst. Commissioner of CGST & Central Excise and Others in W.P. No. 23360/2019 interest has to be calculated on net amount with retrospective  effect as there is anomaly and various other Courts have granted stay on the interest portion, according to me, the section itself does not say anything on gross or net amount and when the input tax credit in the credit ledger is available with the dealer, the department saying that it cannot take into consideration the credit ledger amount but can only take the cash ledger amount is a superlative or atrocious as whether credit ledger or cash ledger does not make any difference and when the section is not saying of these things, the rules or the notification or the GST Council or the departmental officials saying that they will take only cash ledger as input tax credit is improper,  more so when the section is silent about gross or net the interest has to be calculated on net amount only as the cash ledger or credit ledger does not make any difference for this purpose.

It is no doubt true that the department would be always marching forward to levy the assessees with interest but though as senior standing counsel appearing for the department, as an advocate, I feel that it is my duty to definitely oppose such levy and the thought of levying interest for non filing of Form 3B for the assessment year 2017-18 and 2018-19 more over when no date has been prescribed for filing of Form 3B when respective notification has been issued and levying interest on the gross amount has provoked me in writing this article and hope this article has served the purpose and of course it is my opinion on the levy of interest.