CA Shubham Jain
More than half of the decade has been passed since the GST Implementation and lot of GST legal issues are there one of them which is about the Interest liability on delayed payment.
As we know that in case of delayed payment of GST the interest liability will be triggered @ 18% p.a. under section 50(1) of the CGST Act, 2017. Earlier there was a dispute regarding the amount on which interest shall be calculated whether it is gross tax liability or it is net tax liability to be paid through the cash ledger. Government has retrospectively amended the section 50(1) through the Finance Act, 2021 by inserting the proviso that the interest shall be levied on the net tax liability that is required to be paid through the cash ledger. In simple words, the interest shall be levied only on the balance portion of tax after utilizing the credit balance.
E.g.
| Particluars | Amount (Rs.) |
| Output Tax Liability | 1,00,00,000/- |
| Less:- Input Tax Credit | 80,00,0000/- |
| Net Tax Liability to be paid through cash | 20,00,000/- |
Now after amendment interest shall be levied only on the amount of Rs.20,00,000/- not on Rs. 1 crore.
Another issue is whether the interest shall be levied when the Tax has been deposited in the cash ledger before filing of GSTR-3B but the GSTR-3B could not be filed on due date and hence filed after the due date?
Now as per the provisions of section 39(7) of CGST Act, 2017 taxpayer shall pay to the government the tax dues as per the return not later than the last date on which he is required to furnish the return. Means the date of payment of tax to the government shall be the date of filing of GSTR-3B in which there is payment of tax liability. As per section 50(1) of the CGST Act, 2017 interest shall be levied only on the amount which remains unpaid.
Now question arises whether the tax deposited in the cash ledger before the due date will be deemed as tax paid. According to provisions of the GST Act the Tax to be deemed as paid to the government exchequer account only when the cash ledger/ credit ledger is debited in the GSTR-3B mere deposit of the amount in the Electronic Cash Ledger shall not be deemed as payment of tax to the government exchequer account. Electronic cash ledger is like a paytm, Paypal wallet which records the deposit and payment in the ledger and as per the provisions of Section 49 taxpayer can claim the refund of the amount lying in the electronic cash ledger. Therefore mere deposit in the cash ledger cannot be said to be payment to the government because the taxpayer retains the right to claim the refund of amount in the electronic cash ledger every time. The same can be understand through the example given below:-
E.g. ABC Limited is a company having its registered office in Delhi and is registered under the GST Act.
ABC Limited for the month of Jan, 2023 has total tax liability of Rs. 1 crore and has Eligible Input Tax Credit of Rs.80 lacs. Due date of filing of GSTR-3B is 20th Feb, 2023. Hence in order to file the GSTR-3B for the month of Jan Company has deposited Rs.15 lacs in the electronic cash ledger. And due to the funds issues balance Rs.5 lacs could not be deposited up to 20th Feb and hence the return could not be filed on that date. Company has arranged the funds and deposited the amount on 25th Feb and filed the GSTR-3B on the same date along with the interest on Rs.5 lacs calculated @ 18% p.a. on the contention that the interest shall be levied on the amount which is to be paid through the cash ledger and which is paid after the due date of GSTR-3B.
Now as per the provisions of the GST Act along with the GST Rules, the interest liability shall be calculated as follows:-
|
S. No. |
Particulars | Amount (Rs.) |
| 1 | Total Output Tax | 1,00,00,000/- |
| 2 | Total Input Tax Credit | 80,00,000/- |
| 3 | Net Tax to be paid in Cash | 20,00,000/- |
| 4 | Tax Paid before 20th Feb | 15,00,000/- |
| 5 | Tax Paid on 25th Feb i.e. after Due date | 5,00,000/- |
| 6 | Interest liability on (20,00,000*18%*5/365) | 4,931/- |
In this case the debit of the cash ledger made on 25th Feb, 2023 therefore this will be date of payment to the government exchequer. Any amount paid before that cannot be treated as advance tax as same as per the Income Tax and will not escape taxpayer from interest liability. Interest under section 50(1) of the CGST Act, 2017 shall be levied on 20 lacs which is debited from the cash ledger on the date of filing of GSTR-3B.
Reference:-
The law was interpreted with the help of the RSB Transmission India Limited (Jharkhand HC) for better understanding of the section please refer to the full Case order. Please also refer section 39,47,49 & 50 along with the rules made thereunder.
We have analyse and presented the scenario in a bird eye view to give an understanding how the interest shall be calculated and levied on the delayed payment.
Most of the supplier / Receipent faces a few silent notices attached for the first year 2017-18 in his gst portal ,later on order passed through show caused and Tax, penalty, interest all are imposed with DRC 03 demand to be paid withn Dec 2023?? Remedy to get permanent relief from that silent tax victims?
Most of the supplier / Receipent faces a few silent notices attached for the first year 2017-18 in his gst portal ,later on order passed through show caused and Tax, penalty, interest all are imposed with DRC 03 demand to be paid withn Dec 2023?? Remedy to get permanent relief from that silent tax victims?
in my opinion the above decision of the Honourable High Court of Jharkhand needs Revision/Reconsideration inasmuch as the tax payer deposits the tax amount in the Notified Bank in the GST ie., in Government account only and in which case the Government can and have authority to utilize this deposited tax amount at any time without the consent of the tax payer, since it is credited to, and available in Government’s account only. Further the tax payer, who deposited this amount, though available in his cash ledger,cannot take back or withdraw the at his will and pleasure,unless it is refunded by the GST department under Section 54 of the GST ACT. I feel that creation of two Electronic ledgers one in the name of CASH and another in the name of CREDIT is artificial since whatever amounts are paid towards taxes either by cash or by means of ITC would be credited to the account of that particular tax payer for his utilization for payment outward tax.
Exactly.
The concept of E Wallet, also mentioned in the High Courts judgment is illusory and appears to be a product of sustained rumor.
RBI in an RTI reply has informed that GST is credited to the Government Account on the date of challan. The CBIC in RTI reply has informed that the periodic GST collection amount are derived by summation of PMT-06 challan.
Its ironical that the Government has received the Tax in its pocket on the one hand and collecting interest from tax payers that they have not paid the tax.
Imagine – Recipient has received the money without the payer making the payment.