“50. (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 [or section 74A] in respect of the said period, shall be payable on that portion of the tax which is paid by debiting the electronic cash ledger.”
Thus, the amended provision provides exemption from payment of interest to the extent of tax paid through ITC, though the said tax is paid belatedly. However, certain conditions are attached to that. On the face of it, there seems to be only one condition — the waiver is not available once any proceedings under Section 73, 74 or 74A are initiated. However, there is another vital condition which taxpayers often overlook. The condition is, declaration of the supplies made in a tax period in the GSTR-3B filed for the relevant period. If any portion of the turnover is carried forward and reported in a subsequent return, the relaxation from payment of interest is not be available on such short declared portion, though the tax is dischrged through ITC. We try to understand the said condition with a few examples .
ILLUSTRATION :
X is a taxpayer. The taxpayer is engaged in trading activity and the applicable tax rate on the outward supplies is 12%. The turnover and other details for the month of January, 2024 are as under.
Month : January, 2024
Taxable turnover : Rs.1,00,000
Tax payable : Rs.12,000
Scenario I:
Taxable Turnover declared in GSTR-3B filed for the month of January, 2024 : Rs.1,00,000/- ;
Date of filing of GSTR-3B : 20.03.2024 (delayed by 1 month) ;
Mode of payment of tax: Rs.9,000/- through ITC and Rs.3,000/- through cash.
In the above example, since the taxpayer has declared all the supplies in the said return, payment of interest is limited to the extent of the tax paid through cash only.
Scenario II:
Taxable Turnover declared in GSTR-3B filed for the month of January, 2024 : Rs.1,00,000/- ;
Date of filing of GSTR-3B : 20.05.2024 (delayed by 3 months) ;
Mode of payment of tax: Rs.12,000/- through ITC .
In the above example, since the taxpayer has declared all the supplies in the said return, interest is not required since the tax is discharged through ITC, though belatedly.
Scenario III:
Total taxable turnover for the month of January, 2024 : Rs.1,00,000/-
Taxable Turn over declared in GSTR-3B of January, 2024: Rs.60,000/- and Rs.40,000 in February , 2024
Date of filing of GSTR-3B returns : 20.02.2024 for the month of January and 20.03.2024 for the month of February. Hence, as far as filing of returns are concerned , the same are filed within the due date.
Mode of payment of tax: both the tax liabilities i.e Rs.7,200/- ( for the month of Jan ) and Rs.4,800/- (for the month of Feb) are discharged through the ITC.
In the above example, the Taxpayer has discharged the entire tax liability by debiting the ITC. However, he has short declared the turnover to an extent of Rs.40,000/- in the return related to the January, 2024. Hence, though the tax liability of Rs.4,800/- paid by ITC, waiver of paying interest is not applicable . Accordingly, the Taxpayer has to pay the interest on said tax of Rs.4,800/- for the default period of one month.
( The above illustrations are given on the assumption that no proceedings have been initiated by the department under Section 73, 74 or 74A in respect of the relevant tax period)
KEY TAKEAWAYS:
i Interest under Section 50 shall be charged only on the net cash liability, excluding the amount paid through ITC;
ii. This benefit is applied retrospectively from 01.07.2017 (through Finance Act, 2021).
iii. Condition 1 (commonly understood): The waiver is not applicable once proceedings under Sections 73, 74, or 74A have been commenced;
iv. Condition 2 (frequently neglected): All transactions for a tax period must be completely reported in the GSTR-3B for that corresponding period;
v. When turnover is short -declared and shifted to a subsequent return, interest shall be payable on that amount—regardless of whether the liability is discharged through ITC.
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Disclaimer: The author is a Superintendent in Central Taxes. The views expressed in this article are strictly personal.
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