Arjun (Fictional Character): Krishna, What debate is undergoing on GST interest?

Krishna (Fictional Character): Arjuna, Under Sec 50, interest is levied in GST. Hyderabad GST Commissionerate has issued standing order on 4th   February, 2019. It lead to argument between taxpayer and government.

Arjun: Krishna, When is interest levied under GST and who is liable to pay it?

Krishna: Arjuna,

1. Every person who is liable to pay tax in accordance with the provisions of this Act or the rules made there under, but fails to pay the tax or any part thereof to the Government within the period prescribed.

2.A taxable person who makes an undue or excess claim of input tax credit under sub-section (10) of section 42 or undue or excess reduction in output tax liability under sub-section (10) of section 43, shall pay interest on such undue or excess claim or on such undue or excess reduction.

3.The 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.

Arjun: Krishna, What are rates for payment of interest?

Krishna: Arjuna,

1. Every person who is liable to pay tax in accordance with the provisions but fails to pay such tax shall pay interest at such rate not exceeding 18 per cent.

2. A taxable person who makes an undue or excess claim of input tax credit shall pay interest on such undue or excess claim, as the case may be, at such rate not exceeding 24 per cent.

Arjun: Krishna, What Hyderabad GST Commissionerate ordered and how debate actually started?

Krishna: Arjuna, As per guidelines of Hyderabad GST Commissionerate

For an example: If taxpayer files GST return for the month July 2018 in December 2018 and

1.If output liability is Rs. 1,00,000/- and ITC is 75,000/- but still taxpayer is liable to pay interest on Rs. 1,00,000/- and not on Rs, 25,000/-

2.If output liability is Rs. 50,000/- and ITC is 75,000/- but still taxpayer is liable to pay interest on Rs. 50,000/- though taxpayer has no output liability.

3.If output liability is nil and ITC is 75,000/-. Further taxpayer has wrongly claimed credit in previous return and reversed the same. The taxpayer is liable to pay interest on such reversal.

Arjun: Krishna,What should the taxpayer learn from this?

Krishna: Arjuna, There is debate going on the guidelines of Hyderabad GST Commissionerate. Government should not charge interest on output liability but should charge on net liability. The question haunting is that would GST lead to same suffering as it lead to in the times of moneylenders.

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12 Comments

  1. V. K. Verma says:

    GST Council has already decided to amend Sec.50 to charge interest on NET tax liability in December 2018. But neither Central Govt. nor any State Govt. made amendment to this effect. As of now, there is no concept of NET TAX liability under GST. It says OPT can be paid either from ITC or from E Credit L. Your option. Challan to pay the liability in cash is generated only when you file 3B. So, the interest on delay is applicable on the total amount of OPT and not on the NET tax Liability even though the amount of ITC is already deposited with the Government by the Vendor(s).
    Further ITC is always made a source of litigation by govt., be it any indirect tax. Here in GST also, you are eligible to ITC only if the vendor files its return in GSTR-1 and declares supplies to you, which is not in your control. There is no meaning of other compliances to claim ITC, which are under your control say receipt of goods/services and receipt of tax invoice, timely payment etc. All these become redundant if the Vendor did not declare your transaction. What to do ……… Hon’ble Supreme Court of India, has already declared the law laid down by Hon’ble High Court of Delhi which clearly says that bonafide purchaser can not be denied ITC because of non-compliance on the part of seller. Ref: Sec.9(2)(g) of the Delhi VAT Act.
    The provisions under GST are not only illogical, unwarranted but also amount to impediment to free flow of trade and commerce and more particularly to ease of doing business. Now it is being circulated that a system is being proposed to put in place where certain assesses would be required to generate invoice on the GSTN portal itself, to regulate the matter of ITC, but what about the other factors/vendors.
    Let the Govt. amend the law and on all B2B (RP to RP) invoices, only the recipient of supply should be made liable to deposit tax under RCM and then claim ITC.

  2. Dear Sir ~ GST: Good & Simple tax as announced by Our Beloved Prime Minister is diluted very much, with the entire GST office work shifting to the office of the registered dealer. And the state of dealer is not much better than the GST Help Desk. The web of amendments and notifications has begun to choke rather than being simplified.

    The Government has prescribed rate of Interest as 18% or 24% payable on default as applicable and the rate of interest prescribed is 6% on refunds ~ one really is in wonderment as this state. And now the Hyderabad Commissionerate has dealt a blow to crippling collections and where it will lead needs to be witnessed. And this comes in the wake of GST council discussing amendment to section 50. https://taxguru.in/goods-and-service-tax/principle-approval-centralised-aaar-interest-net-tax-liability-31st-gst-council-meeting.html

    TDS/TCS provision have been made applliacble from 1-10-2018. And the return filing dates have been already extended to 28-02-2019 for the deductors, who are mainly Government Department or bodies. Whereas the deductee has no relief till the TDS returns are uploaded. He has to either wait for the TDS returns to be uploaded or pay the TDs tax to file GSTR3B for Oct, Nov, Dec and Jan. And this attracts late fee and interest.
    Much more to GST that a Dealer has to put up with not to mention at least, the way the website behaves for filing the returns.

    Dearest Prime Minister ji and Finance Minister ji, please let the GST server, procedures and formats etc., stabilise and than talk of Late Fee, Interest, and Penalties. Because we are partners in progress and in the rejuvenation of GST which is slowly getting entangled in complications than simplification.

    Let GST be resurrected as GOOD & SIMPLE TAX .

    Thanking you as we all walk hand in hand together to realise the dream of One Nation One Tax.

    1. GALA ASHWIN says:

      Dear Mr. Mukesh Parmar ,

      Very well drafted. All Associations & assessees must raise voice on this lines.

      Very much need of the hour. The GST authorities & the Govt. must respond to this positively.

      CA ASHWIN GALA

  3. venkat raghavendra says:

    Please correct me if I am wrong.
    Council meeting held on 29-12-2018 has clarified that the interest will be charged on Net Tax payable not on the gross.

  4. JITENDER KUMAR RANKA says:

    Yes. Surely It is a harrasment. If at all interest should be payable only on net tax payable. If no tax payable even after wrong ITC no interest.

    Further rate of interest is very heavy, it should be only 6% as in case of refunds delay by dept.

  5. vswami says:

    OFFHAND
    “TAXPAYER”- basic question to find an answer to, -who is the so referred?- Is it the one who ‘collects’ and pays it over to the Exchequer or the one from whom so collected and paid over.

    Presumably, in the mythological times – the querist and the OPIONIST – there was no ‘GST’ , therefore, no ‘interest’ ; for that matter, no ‘public interest’ to lead to suffering- in the form of ‘litigation’.
    Remember the concept or era of ‘PIL’ came to be ushered in , after “KRISHNAIYERISATION ” (of a recent origin- to quote a reputed SC Advocate- was, if got it right , to Justice VR Krishna Iyer , the founder father / champion of “PIL” (of our own times) !

    RESOURCE: Google Search

  6. kalpeshamonkar@gmail.com says:

    This means not only ITC even Cash deposited in electronic cash ledger on time but fails to file return within due date then interest will be charged on full GST liability without taking into consideration the Payment deposited.Secondly this will also lead to litigation under section 122(1)(iii) where tax is collected and not paid to Government within three months from the due date of payment i.e.filing of Return. comments pls

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