Interest on late payment of GST from extended due date or from original due date of filing GSTR 3B

As per the verdict of the Hon’ble Gujarat High Court in the case of AAP & Co. Chartered Accountants v/s Union of India [R/Special Civil Application No. 18962 of 2018 dated June 24, 2019], it was held that GSTR 3B was not a return in lieu of GSTR 3 specified u/s 39 of CGST Act, 2017 (hereinafter referred to as “the Act”) and is applicable only in the circumstances stipulated under Rule 61(5) of CGST Rules (hereinafter referred to as “the Rules”).

Accordingly vide notification No. 49/2019 dated 09th October, 2019 the Central Government amended Rule 61 of the Rules by way of inserting sub-rule 5, which provides that where the time limit for filing return in GSTR 1 under section 37 of the Act and GSTR 2 under section 38 of the Act has been extended, return filed in Form GSTR 3B shall be considered as return under section 39(1) of the Act.

Further the above amendment was carried out retrospectively i.e. with effect from 01.07.2017.

As Central Government has extended due date for filing Form GSTR 3B on various occasions for various class of person, for various states etc. Whether Central Government is right in demanding interest on late payment of liability from original due date of filing Form GSTR 3B? or extension of due date is applicable only for waiver of late fees?

Here we are not talking about charging of interest on gross tax payable or net tax payable, that question is of Rs. 46,000 Crore (to be precise) and altogether separate issue.

Notification No. 21/2017 dated 08th August, 2017 and Notification No. 56/2017 dated 15th November, 2017 notified the due date for filing Form GSTR 3B for the months Jul-17 and Aug-17 and from Jan-18 to Mar-18 respectively.

Similarly vide Notification No. 34/2018 dated 10th August, 2018 the Central Government has notified the due date as 20th of succeeding month for filing Form GSTR 3B for the period from Jul-18 to Mar-19.

Vide Notification No. 31/2018 dated 06th August, 2018 the Central Government notified the special procedure for completing migration of taxpayers who received provisional IDs but could not complete the migration process by filing Form GST REG-26 after furnishing the information in given format to the concerned nodal officer.

Vide Notification No. 45/2018 dated 10th September, 2018 the Central Government inserted following proviso in above notifications:

“Provided that the return in FORM GSTR-3B of the said rules to be filed for the period from July, 2017 to November, 2018 by the taxpayers who have obtained Goods and Services Tax Identification Number (GSTIN) in terms of notification No. 31/2018 – Central Tax dated the 06th August, 2018 published in the Gazette of India vide number G.S.R.742(E), dated the 06th August, 2018, shall be furnished electronically through the common portal on or before the 31st day of December, 2018.”.

Further the above due date has been extended to 31st March, 2019 and for the period from July 2017 to February 2019 vide Notification No. 70/2018 dated 31st December, 2018.

It is also pertinent to note that, wherever due date for filing Form GSTR 3B has been notified by abovementioned notifications, mode of payment of tax, interest, penalty, fees or any other amount has also been prescribed in the said notification, extract from Notification No. 34/2018 dated 10th August, 2018 has been reproduced herewith:

Payment of taxes for discharge of tax liability as per FORM GSTR-3B.– Every registered person furnishing the return in FORM GSTR-3B of the said rules shall, subject to the provisions of section 49 of the said Act, discharge his liability towards tax, interest, penalty, fees or any other amount payable under the said Act by debiting the electronic cash ledger or electronic credit ledger, as the case may be, not later than the last date, as specified in the first paragraph, on which he is required to furnish the said return.

Section 50(1) of the CGST Act reads as under:

“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.”

Section 50(2) provides that interest u/s 50(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.

Section 2(87) of the Act defines the term “prescribed” – Prescribed to mean prescribed by Rules made under this Act on the recommendations of the Council.

Vide Notification No. 13/2017 dated 28th June, 2017 Interest rate of 18% p.a was prescribed for the purpose of section 50(1) of the Act.

Hon’ble Supreme court in Pratibha Processors v/s [UOI 1996(11) SCC 101] has held as under

“Interest is compensatory character and is imposed on an assessee who has withheld payment of any tax as and when it is due and payable. The levy of Interest is geared to actual tax withheld and the extent of delay in paying the tax on the due date.”

Based on above discussion and combined reading of amendment and various notifications, inference drawn is that wherever the due date for filing Form GSTR 3B has been extended the department is not right in demanding interest on tax liability from the original due date and extension of due date cannot be applied only for waiver of late fees and not for charging interest.

Further if you are falling in the category as notified in Notification No. 34/2018 supra, you can take the benefit and discharge interest liability from the due date as notified vide Notification No. 70/2018 supra.

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