Clause No. 103 of the Finance Bill, 2021 provides charging of interest on Net Tax Liability u/s 50, CGST Act, 2017 by substituting proviso to sub-section 1 retrospectively, w.e.f. 1.7.2017.
Section 50(1) of the CGST Act after the proposed amendment, if implemented, will read as under;
“50. Interest on delayed payment of tax.─(1) Every person who is liable to pay tax in accordance with the provisions of this Act or the rules made thereunder, but fails to pay the tax or any part thereof to the Government within the period prescribed, shall for the period for which the tax or any part thereof remains unpaid, pay, on his own, interest at such rate, not exceeding eighteen per cent, as may be notified by the Government on the recommendations of the Council.
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 the 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 payable on that portion of the tax which is paid by debiting the electronic cash ledger.”
Notes to Clause No. 103 of the Finance Bill, 2021 reads as under;
Notes on Clause 103─S.50, CGST Act is being amended, retrospectively, to substitute the proviso to sub-section (1) so as to charge interest on net cash liability w.e.f. 1.7.2017.
Our Comment/analysis.─This proviso excludes the taxable persons where such return is furnished after commencement of any proceedings under section 73 or section 74 in respect of the said period, meaning thereby;
“that the taxable persons against whom, any proceedings under section 73 or section 74 have been initiated prior to passing of Finance Bill, 2021 are liable to pay interest on Gross Liability of Tax.”
There are hundreds of cases of this nature of various taxable persons all over India, against whom demands have been raised, by illegal interpretation of Section 30(1), CGST Act, 2017, as under;
The interest liability u/s 50(1), CGST Act, 2017 is attracted on the Tax remained unpaid beyond the due date. Since the word “remained” has been used after the word “tax”, it goes to conclude that the legislature’s intention is to recover interest on the net tax liability. The term ‘Tax remained unpaid’, can not be interpreted to mean “tax chargeable under this Act” (i.e., gross tax liability on output supply), ignoring the basic cannons of interpretation of Taxing Statute that “every taxing statue including, charging, computation and exemption clause (at the threshold stage) should be interpreted strictly. It is settled proposition of law that taxing statutes are to be interpreted literally and nothing could be added to what is stated in the statute itself. The court only interprets the law within the four corners of the Act and cannot legislate it under the disguise of interpretation.
The introduction of proposed proviso in S.50(1), CGST Act, 2017, by Finance Bill, 2021, w.e.f. 1.7.2020 is contrary to the;
(i) Specific language employed by the legislature in S.50(1), CGST Act, 2017.
(ii) Recommendations of GST council meetings.
The phrase in the proviso, does not find place in any GST council meetings.
The effect of this exception in the proviso excludes those taxable persons against whom any proceedings u/s 73 or S.74 were initiated for levy of interest and as such they will be liable to pay the interest on Gross Tax Liability, when returns filed late, without adjustment of ITC lying with the Govt., which is against the Specific language employed by the legislature in the S.50(1), CGST Act, 2017.
In our view, the legitimate clear interpretation of S.50(1) as mentioned above, should be taken into account and the Govt. should amend the wrong proviso proposed to be inserted in S.50(1), CGST Act, 2017, to be effective w.e.f. 1.7.2017.
Moreover, there is no rhyme & reasons for proposed amendment contained in exception clause of proviso to S.50(1), CGST Act, 2017. It has been inserted just to legalise the wrong doing by the Department. The various cases decided by different High Courts in favour of the Taxable persons, are as under;
Prasanna Kumar Bisoi v. Union of India (2020) 34 J.K.Jain’s GST & VR 159 (Orissa), KLT Automotive and Tubular Products Ltd. v. Union of India (Bom) (2020) 34 J.K.Jain’s GST & VR 423, Maansarovar Motors Pvt. Ltd. v. Assistant Commissioner (Mad) (2020) 34 J.K.Jain’s GST & VR 411, Refex Industries Ltd. v. Assistant Commissioner of CGST & C/E(Mad) (2020) 33 J.K.Jain’s GST & VR 139.
Without deleting the exception clause in the proposed proviso, if the Budget is passed, it will lead to lot many litigations & sheer wastage of Govt. money over court cases besides harassment of public at large.
. (2018) 30 J.K.Jain’s GST & VR 105 Commissioner of Customs v. Dilip Kumar and Company
. (20117) 28 J.K.Jain’s GST & VR 162 State of Karnataka v. M.K. Agro Tech Pvt. Ltd.
. (2011) 16 J.K.Jain’s Vat Reporter 120 Eureka Forbes Limited v. State of Bihar and Ors.