Background
Recently, the SGST and CGST Departments have issued Intimation for payment of Interest on Self-Assessment Tax Paid which pertains to Section 50 Interest payable on such Self-Assessment Tax Paid Belatedly and by Virtue of Section 75 Clause (12) such Demand of Interest issued. If such Interest not paid will be recovered as per Section 79 of CGST Act, 2017 which prescribes various modes of recovery of tax and if the tax payer do not pay interest then in such case FORM GST DRC-01D i.e. Intimation for amount recoverable under Section 79 will be issued and after that if no payment done the SCN will be given in as per Presided Rules and it will be followed by FORM GST DRC-07 Demand Order. Before jumping onto subject, it is crucial thing to know what Supreme Court has explained the distinction between the term ‘tax’, ‘interest’ and ‘penalty? In Pratibha Processors Case. Let’s understand that first.
Principle laid down by Supreme Court on collection of Interest in the Pratibha Processors Case:
The Supreme Court in the matter of Prathiba Processors v Union of India 1996 (88) ELT 12 (SC), has explained the distinction between the term ‘tax’, ‘interest’ and ‘penalty’ that are used in fiscal statutes. The relevant extract of the judgment is reproduced hereunder:
13. In fiscal Statues, the import of the words – “tax”, “interest”, “penalty”, etc. are well known. They are different concepts. Tax is the amount payable as a result of the charging provision. It is compulsory exaction of money by a public authority for public purposes, the payment of which is enforced by law. Penalty is ordinarily levied on an assessee for some contumacious conduct or for a deliberate violation of the provisions of the particular statute. Interest is compensatory in 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 amount of tax withheld and the extent of the delay in paying the tax on the due date. Essentially, it is compensatory and different from penalty – which is penal in character.
- Relevant Statutory Provisions
Now Let’s understand how Interest liability on Self-Assessment Tax Paid arises with Statutory provision with illustration for understanding how Interest Liability on Self-Assessment tax paid accrues, in which situation Under Section 75(12) Recovery of tax or interest can be initiated?
- Interest Liability in GST on Self-Assessment Tax paid
Section 50 clause (1) provides for Levy of Interest on Delayed Payment of Tax as far as GST Law is Concerned. Interest rate is 18% w.e.f. the 1st day of July, 2017 which is Notified by Notification No. 13/2017-Central Tax [G.S.R. 661 (E)] Dated 30-3-2022. Let’s go through once the Section 50 of CGST and SGST Act, 2017.
- Statutory Provisions for Interest and Recovery thereof
| Section of CGST Act | Description | Amendment |
| Section 50 | Levy of Interest on Delayed Payment of Tax | |
| Section 75(12) | Recovery of Self Assessed Tax | Explanation to section 75(12) of CGST Act substituted vide Finance Act, 2021 w.e.f. 1-1-2022. |
–
| CGST Rules | Description | Relevant Forms | Amendment |
| Rule 142 | Notice and order for demand of amounts payable under the Act | FORM GST DRC-07 | Substituted for “tax, interest and penalty payable by the person chargeable with tax” by the
Central Goods and Services Tax (Tenth Amendment) Rules, 2021, w.e.f. 1-1-2022. |
| Rule 142B | Intimation of certain amounts liable to be recovered under section 79 of the Act | FORM GST DRC-01D,
FORM GST PMT-01 |
Rule Inserted by the Central Goods and Services Tax (Second Amendment) Rules, 2023, w.e.f. 4-8-2023. |
- Concept of Self-Assessment Tax Paid
Every GST Registered Taxpayer pays Tax while filling their GSTR 3B in cash, if Liability of pay Tax in Cash arises after set off done of Available ITC. This payment of Tax is Considered as Self-Assessment Tax Payment in GST.
- Illustration of aforesaid concept
Let’s understand the situation of Self-assessment Tax Payment for the Tax Period May 2025 of a GST Registered Tax Payer while filling GST Return of GSTR 3B:
| For the May 2025 Details of GST Registered Tax Payer | CGST | SGST |
| Opening Balance in Electronic Credit Ledger | 20,000 | 20,000 |
| Output Tax Liability | 1,70,000 | 1,70,000 |
| Input Tax Credit Availed in GST | 1,00,000 | 1,00,000 |
| Self-Assessment Tax Liability in Cash | 50,000 | 50,000 |
Tax of CGST 50,000 and SGST 50,000 will be paid in Cash after due date 20th June,2025 i.e. on 25th June,2025. Here, Interest Liability arises on 18% p.a. for this Delayed Payment of Tax of CGST 50,000 and SGST 50,000.
- Recovery Proceedings without issue of Show Cause Notice if Self Assessed Tax and Interest thereon not paid
Section 75 General provisions relating to determination of tax
(12) Notwithstanding anything contained in section 73 or section 74 or section 74A, where any amount of self-assessed tax in accordance with a return furnished under section 39 remains unpaid, either wholly or partly, or any amount of interest payable on such tax remains unpaid, the same shall be recovered under the provisions of section 79 of CGST Act – section 75(12) of CGST Act – the words “or section 74A” inserted by Finance (No. 2) Act, 2024 w.e.f. 1-11-2024.
For the purposes of section 75(12), the expression “self-assessed tax” shall include the tax payable in respect of details of outward supplies furnished under section 37 of CGST Act [details of outward supplies in form GSTR-1], but not included in the return furnished under section 39 of CGST Act [GSTR-3B]- explanation to section 75(12) of CGST Act substituted vide Finance Act, 2021 w.e.f. 1-1-2022.
Reason for Insertion of Explanation to Section 75(12)
Sometimes, the supplier uploads details of tax invoices and debit notes in his GSTR-1 (so that recipient can avail ITC) but does not include that turnover in his GSTR-3B return. Hence, explanation to section 75(12) of CGST Act inserted vide Section 114 of Finance Act, 2021 w.e.f. 1-1-2022, provides that ‘self-assessed tax’ includes tax payable on details of outward supply furnished in GSTR-1 but not included in GSTR-3B and recovery under section 79 of CGST Act can commence, without issuing notice under section 73 or 74 of CGST Act. Thus, if outward invoices are uploaded by taxable person in his GSTR-1 but liability is not shown in his GSTR-3B return, recovery of tax can be done without issuing demand notice.
However, in view of explanation added, the tax shown as per GSTR-1 will be treated as tax payable, after deducting ITC that might have been shown in GSTR-3B return.
| Situation | Adjudication Required? | Why? |
| Tax Declared in GSTR 1 and not Declared in GSTR 3B | Not Required | Treated as Self Assessed (Sec. 75(12)) |
| Tax Declared in GSTR 1 and Declared in GSTR 3B | Not Required | Treated as Self Assessed (Sec. 75(12)) |
| Wrongly availed ITC covered by Section 50(3) | Required U/s 73 or 74 | Not Covered in Sec 75(12) |
- Power of Recovery to AC/DC
‘Proper Officer’ to initiate and conduct recovery proceedings for the purpose of CGST is Deputy Commissioner/Assistant Commissioner of Central Tax. All powers of recovery under rules 143 to 156 of CGST Rules have been delegated to Deputy/Assistant Commissioner of Central Tax, vide CBE&C circular No. 3/3/2017-GST dated 5-7-2017. [State Government will prescribe ‘proper officer’ for purpose of SGST in the respective State].
- Recovery of tax dues can be made from establishment with separate registration with same PAN ?
A taxable person can have different GST Registrations in different States or even in same State with same PAN. They are defined as ‘distinct persons’ under section 25(4) and section 25(5) of CGST Act.
However, recovery of dues can be made under section 79 of CGST Act from such distinct persons also – explanation to section 79 of CGST Act inserted vide CGST (Amendment) Act, 2018 w.e.f. 1-2-2019.
- Modes of Recovery
As per Section 79(1) of CGST Act, the proper officer (AC/DC) shall proceed to recover the amount. As per my personal view, the prescribed modes of recovery prescribed in Section 79 are Alternative modes reason being “by one or more” phrases used in Section 79(1) so it’s the discretionary powers lies with the Proper Officer.
- Recovery can be done by one or more of the modes mentioned below:
| SR. No. | Various Modes of Recovery | Section of CGST Act, 2017 |
| 1. | Deduction from amount payable to Assessee | Section 79(1)(a) |
| 2. | Sale of Goods belonging to taxable person | Section79(1)(b) |
| 3. | Recovery by Garnishee order (i.e. recovery from a third party) | Section 79(1)(c) |
| 4. | Distraining and detaining movable or immovable property belonging to Assessee | Section 79(1)(d) |
- Judicial Trends on applicability of Section 75(12)
Now, let’s understand the what Various High Court has observed on Section 75(12) and what they declared on this issue?
Section 75(12) of the Act empowers the authorities to proceed with recovery without issuing Show Cause Notice is only misconceived. The said Section is applicable only to the self-assessment made by the assessee and not to quantification or determination made by the Authority.
Facts
One of the issue for adjudication in the instant writ application is as to whether garnishee proceedings under Section 79 of the CGST Act can be initiated for recovery of interest without adjudicating the liability of interest, when the same is admittedly disputed by the assessee.
Verdict
The letter directing to pay Interest issued by Superintendent is hereby quashed/set aside and, further, garnishee notice issued under Section 79 of the CGST Act to the Banker of the petitioner for recovery of interest amount of Rs. 19,59,721/- is also, hereby, quashed/set aside.
It shall be open for the respondent Authorities to initiate appropriate adjudication proceeding either under Section 73 or 74 of the CGST Act (as the case may be) against the petitioner-assessee and determine the liability of interest, if any, in accordance with law after giving due opportunity of hearing to the petitioner.
Issue involved
The Calcutta High Court quashed the recovery order passed under Section 75(12) of the GST Act where the tax liability was already declared in GSTR-3B. The Court held that Section 75(12) applies only where outward supply details in GSTR-1 are not included in GSTR-3B. Since the tax was already included and explained in response to ASMT-10, the department is directed to treat the prior order as a show cause and proceed afresh.
Facts
The petitioner challenged a recovery order under Section 75(12) for alleged tax shortfall of Rs.8,09,248 identified via ASMT-10. The department, without issuing a proper SCN or invoking Sections 73/74, directly passed an order and raised demand through DRC-07.
Held
The Court held that once the self-assessed tax is already declared in GSTR-3B, Section 75(12) is not applicable. The department’s action bypassed due process, and the order is thus invalidated. Respondents are directed to follow prescribed procedure.
The Court held that Section 75(12) cannot be used to bypass adjudication when tax is already declared in GSTR-3B. The explanation to Section 75(12) restricts its applicability to mismatches between GSTR-1 and GSTR-3B. Since no SCN under Section 73/74 was issued, the recovery was illegal. The order and consequential DRC-07 demand are quashed, with liberty to proceed lawfully.
Concluding Comments
If we see this in conservative view, one can say Interest can be recovered by Issuing Advisory for ensuring payment of interest under section 50(1) of the CGST/SGST Act, 2017 in respect of self-assessed tax paid after the due date of furnishing of returns followed with Form GST DRC-01D and FORM GST DRC-07 Summary Demand Order by Proper Officer and Consequently, the Recovery Proceeding can be done by virtue of Section 79. But if we observe the judicial trend one can take recourse of litigation after issuing FORM GST DRC-07 on grounds of Violation of Natural Justice if any and taking ground that if tax is with GSTR 3B then Sec.75 (12) not applicable by relying on above judgements.
Author’s Personal View
I personally believe on this issue “whether Under Section 50(1) and Section 75(12) Unpaid Interest can be recovered for belated payment of Tax in GSTR 3B Filled” cannot be given until and unless Courts gives Verdict on this issue. But it is quite clear that CGST and SGST both Revenue Departments are taking Recovery Action in this regard. Whether to pay Interest or not decision is on Tax Payer and the Tax Consultant and Professionals who gives professional Advice to their clients. If the Tax Payer does not pay Interest and in such a case by revenue, power of Bank Attachment is exercised by Virtue of Section 79, the Tax payer will be in trouble. I personally believe that either tax payer has to litigate by filling Appeal against demand order issued in FORM DRC-07 or has to pay by filling DRC-03 before issuance of Form DRC-07.
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Author: Miss Zalak Sohil Dalal – Advocate| B.com, LL.B., LL.M. | Advocate & Tax Consultant, Surat.
Miss Zalak Sohilkumar Dalal is a 28-year-old practising advocate and tax consultant based in Surat, specialising in GST and Income Tax, with over seven years of experience. Enrolled with the Bar Council of Gujarat and the Bar Council of India since 2020, she holds an LL.M. in Human Rights from VNSGU, Surat, and certifications in cyber law. She serves as a Managing Committee Member (Western Zone) of AIFTP for 2024–25, delivers lectures on GST, and has authored articles in reputed tax journals. She actively participates in legal study circles and refresher courses and has also represented VNSGU in university-level basketball.
