This is with reference to judgment of Hon’ble Telangana High Court in the case of M/s. Megha Engineering & Infrastructures Ltd. v. Comm. of Central Tax, wherein, the petitioner filed a writ petition against the demand of interest for delay in filing GSTR 3B returns, on the ground that interest is to be calculated only on the ‘net tax liability’, after deducting the ITC available from the total tax liability.
Section 50 of the CGST Act which is charging section of Interest under GST is being reiterated below:
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.
The Hon’ble High Court held that interest shall be payable on the gross tax liability and not on net tax liability on the basis of the following:
Basis of this judgment, it has been made clear that the legal position adopted where Interest needs to be deposited (suo-moto) on Gross Tax liability and not net tax liability unlike pre-gst era. The recommendation of GST Council in its 31st meeting needs to brought into effect vide amendment under GST act under section 50 i.e. Interest on “Net tax liability”. Till the amendment is being brought, the Interest needs to be paid on Gross Liability.
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