1. Notification No. 31/2020 – Central Tax dt. 03.04.2020 has been issued providing for relief in terms of interest due to COVID – 19 for the tax periods from February 2020 to April 2020. Relief in a nutshell is as under:
|Registered Person having Aggregate Turnover of the previous FY||Period||If the tax is paid within||And GSTR – 3B is filed within||Interest liability|
|More than INR 5 crores||February 2020, March 2020, April 2020||15 days from the due date as under:
Feb – 4th April
Mar – 5th May
Apr – 4th June
|24th June 2020||Nil|
|After 15 days but on or before 24th June, 2020||9% p.a. for the delay beyond the 15 days.|
|More than INR 1.5 crores up to INR 5 crores||February, 2020 & March, 2020||Tax paid and return filed within 29th June, 2020.||Nil|
|April 2020||Tax paid and return filed within 30th June, 2020|
|Up to INR 1.5 crores||February 2020||Tax paid and return filed within 30th June, 2020||Nil|
|March 2020||Tax paid and return filed within 3rd July, 2020|
|April 2020||Tax paid and return filed within 6th July, 2020.|
2. An issue therefore arises as to whether the twin conditions of making the payment of tax and the filing of GSTR – 3B needs to be satisfied at the same time to avail the concession? In other words, can a taxpayer, having aggregate turnover exceeding INR 5 crores (large taxpayer), deposit the tax for March 2020 by 5th of May in the electronic cash ledger and file the return in GSTR – 3B after debiting the electronic cash as well as credit ledger by the 24th of June and still claim the relief by way of interest being nil?
3. Now the recent Notification No. 31/2020 – Central Tax (supra) amends the original Notification No. 13/2017 – Central Tax dt. 28.06.2017 which stipulates the applicable rate of interest under various provisions of law. Thus the following proviso has been added to the original notification:
“Provided that, the rate of interest per annum shall be as specified in column (3) of the Table given below, for the class of registered persons, mentioned in the corresponding entry in column (2) of the said Table, who are required to furnish the returns in FORM GSTR-3B, but fail to furnish the said return along with payment of tax for the months mentioned in the corresponding entry in column (4) of the said Table by the due date, but furnish the said return according to the condition mentioned in the corresponding entry in column (5) of the said Table, namely:–”
4. A bare reading of the above proviso would suggest that it applies to the class of registered persons who could not file the return along with the payment of tax as per the normal dues dates (i.e. 20th of the succeeding month) for the given tax periods (February, 2020 to April, 2020). It further provides that for such class of the registered persons the rate of interest would be as prescribed (i.e. nil or 9%) if such persons furnish the return by the new dates (as stated in the table above). Thus it would imply that the relief in terms of interest has been linked with the furnishing of the return and not just the deposit of tax in the electronic cash ledger.
5. Even Circular No. 136/06/2020-GST dated 03.04.2020 has taken the same position wherein it has been clarified that the concession in interest would apply only if due tax is paid by filing return in FORM GSTR-3B by the date(s) as specified in the Notification. Thus a prudent approach should be to file the return immediately on making the payment of tax to avail the concession. Hence in our example if the tax for March 2020 is paid by 5th of May, 2020, the return should also be filed by the 5th of May to avail the benefit in terms of nil interest. If the return is filed let us say on 24th June 2020 the interest @ 9% may apply even though the tax was deposited by the 5th of May, 2020.
6. Now the above conclusion may seem unfair to a taxpayer having an aggregate turnover of more than INR 5 crores who has deposited the tax in the electronic cash ledger by the given dates (within 15 days grace period) but files the return and debits the cash ledger by 24th June 2020. Following contentions can be made by such taxpayer to seek the concession:
a. As per Sec. 50(1) of the CGST Act, 2017 interest is leviable on failure to pay the tax within the prescribed time. Hon’ble Supreme Court in the case of Pratibha Processors v. Union of India 1996 (88) E.L.T. 12 (S.C.) has held that the levy of interest is geared to the actual amount of tax withheld and the extent of the delay in paying the tax on the due date. Therefore can it be said in cases where the tax already stands deposited in the electronic cash ledger but the same is debited with a delay that the tax has not been received by the Government and hence interest can be imposed till the date of debit? Now the money paid in the electronic cash ledger is credited in the respective Government’s Consolidated Fund (see Report on business processes for GST by Empowered Committee of State Finance Ministers). It is on confirmation of the receipt from the respective bank that the money paid is credited in the electronic cash ledger of the given taxpayer for utilization. Article 266 of the Constitution of India provides that all the revenues of the Government of India/States must be credited in the Consolidated Fund of India/States. Hence once such money paid in the electronic cash ledger stands credited in the Consolidated Fund, it cannot be said that such money has not been received by the respective Government. The credit in the electronic cash ledger and the debit from the said ledger for offsetting the liabilities are merely accounting entries maintained on the portal. Hence it can be contended that in the absence of any delay interest should not be imposed u/s 50(1).
b. As per Sec. 39 of the CGST Act, 2017 only the due date for payment of tax has been linked with the due date for filing of the return. However as per law the event of paying the tax can be independent of the event of filing of the return. Therefore the linking of the debit in the electronic cash ledger only with the filing of the return (for return related dues) is not in accordance with law. Recently Courts have held (e.g. Vision Distribution Pvt. Ltd. v. Commissioner W.P.(C) 8317/2019 (Del.)) that the taxpayer cannot be made to suffer due to the issues of the GSTN portal. Hence the imposition of interest due to a mechanism not in accordance with the law may not be correct.
c. Concessions concerning interest and late fees have been provided to support the businesses from the adverse impact of COVID – 19. Hence should a businessman who pays the tax within the grace period but files the return late (due to issues of compiling accurate data during the lockdown or making only partial payments within the grace period), but within the time limit of 24th June, be thrust with the interest cost when the Government has already got the revenue? Interpretation favouring the businessman must be considered.
7. Without prejudice to above it may also be noted that as per the decision taken during the 39th GST Council Meeting even if the return filing is delayed, interest would not apply to the portion of the tax paid by debiting the electronic credit ledger (ITC).
8. We can therefore summarize the entire discussion as under:
i. It would be prudent for the large taxpayers (turnover above INR 5 crores) to pay the tax and also file the returns simultaneously to avoid the controversy. It would also be prudent for the other taxpayers (turnover up to INR 5 crores) to pay the tax and file the return by the extended dates (falling in the last week of June and the first week of July) to avoid interest liability.
ii. For the large taxpayers even if the tax is paid within the grace period but the return is filed late (however the same is filed by 24th June 2020) it can be contended that the interest cannot be imposed. Similar arguments can also be made for cases where tax is paid partially over a period of time and the return is filed by 24th June. In such case relief from interest can be contended for the period post the payment of each in stalment.
In any case interest cannot be imposed on the amount of tax paid by utilizing the ITC.