Interest on GST – Section 50 -A New Hurdle

Since GST has been Implemented Every Day a New hurdle is taking place in GST compliances Government is trying to do various experiment. As from several months the government Revenue from GST is constantly Decreasing the government changed the Rules & Conditions for claiming the Input Tax Credit (ITC) in GSTR-3B CBIC has inserted the new Sub-rule (4) to Rule 36 with effect from 09.10.2019 Extract of sub-rule (4) of 36 areas “Input tax credit to be availed by a registered person in respect of invoices or debit notes, the details of which have not been uploaded by the suppliers under sub-section (1) of section 37, shall not exceed 20 percent which is now it is reduced to 10% as decided in 38^th council meeting held on 18.12.2019. As now a new hurdle is inserted by government by demanding interest on Late filling of GSTR-3B since the government gave various relief to taxpayers regarding GSTR-3B & GSTR-1 Return till 31^st MARCH 2019 for FY 2017-18 & 2018-19 but what about those tax payers who are regularly filed return or may have filled late return & paid Late Fees. The government Is Day by Day creating more hurdles for Tax payers & Demanding Revenue in name of late fees which are not at all liable because of GST Portal Technical Glitches.

NEW HURDLE IN NAME OF INTEREST

As various Articles & Calculation & Objections Are Going on through Various Petition & Representation for Interest on Gross Liability. As various Rumours were circulating on Recovery About 44000 Crore of Interest Recovery by Government. Various Information through Official Social Account of Goverment

Section 50 of CGST Act 2017 governs the Interest on delay payment of output tax liability.

Section 50 of Central Goods and Service Tax Act 2017 read with notification no 13/2017 dated 28-06-2017 states circumstances for payment of interest and the rate of interest which are as under:-

(a) Section 50(1) :- where a person is liable to pay tax ,fails to pay the tax or any part within the period prescribed, interest is payable at the rate of 18%.

(b) Section 50(3) :- When recipient has makes an excess or undue claim of ITC as per section 42(10) or undue or excess reduction in output tax liability under section 43 (10) of the CGST Act, rate of interest applicable will be 24% ( on Wrongly claimed ITC)

Recently GST department has started sending notices to all taxpayer who has filed their GSTR 3B late for asking Interest on GROSS TAX LIABILITY shown in GSTR 3B for FY 2017-18, 2018-19 & 2019-20 which is still yet not completed and taxpayer across the India is receiving the notices for payment of Interest. The Same Needs to be Pay through Form DRC-03.

As per section 50(1) of CGST Act before amendment made by Finance Act (FA) 2019 is as under:-

50 (1) Every person who is liable to pay tax in accordance with the provisions of this Act or the rules made there under, 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.

Government has thereafter inserted one proviso in Section 50(1) by FY 2019 is as under:- “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 in respect of the said period, shall be levied on that portion of the tax that is paid by debiting the electronic cash ledger”

In My view, Even earlier, interest was payable only on net amount of tax payable by cash after allowing ITC available. The reason is that interest is compensation and not a penalty.

GST Department has one favourable judgment form Telangana High Court in case of Megha Engineering& Infrastructures Ltd. v. Commissioner of Central Tax [2019] 104 taxmann.com 393 (TELANGANA) which stated Payment of interest on Gross Amount.

But after that the various judgment came in favour of tax payer by paying Interest only the net Liability given by Honourable Madras High Court in Case Refex Industries Ltd. Vs Assistant Commissioner of CGST & Central Excise (Madras High Court) on 06/01/2020.

AS on 13.02.2020 The honourable Gujarat High court Gave Stay on Interest on Gross Liability  and  Directed  the department to not to take any coercive steps for the purpose of recovery of the interest by giving Judgement in case of Amar Cars Private Limited Vs Union of India (Gujarat High Court)

As Taxpayer are the Ultimate Victim by Paying Additional Burden in name of Interest Which Contradicts the Goverment Quote as Good & Simple Tax.