pri Interest on Late payment of GST on Gross Liability Interest on Late payment of GST on Gross Liability

During the 31st GST council meeting dated 22nd December 2018, it was proposed that – Section 50 of CGST Act 2017 should be amended to allow payment of interest on Net cash liability, i.e. interest should be charged only on the net liability of taxpayer, after taking into account the admissible ITC.

However, no amendment has been made to give effect such recommendations of GST council, till date.

(Reference: Minutes of 31st meeting, as attached herewith- Page No. 81- Link – )

However, high court has provided a reply to writ filed by Megha Engineering & Infrastructure Ltd, wherein it has been mentioned that (file attached herewith):

Until a return is filed as self-assessed, no entitlement to credit and no actual entry of credit in the electronic credit ledger takes place. As a consequence, no payment can be made

from out of such a credit entry. Tax becomes an input tax credit only when a claim is made in the returns filed as self-assessed.

It is only after a claim is made in the return that the same gets credited in the electronic credit ledger. It is only after a credit is entered in the electronic credit ledger that payment could be made, even though the payment is only by way of paper entries.

The high court further mentioned that :

The recommendations of the Council in 31st meeting will be made effective only after the necessary amendments in the GST Acts are carried out. But, unfortunately, the recommendations of the GST Council are still on paper. Therefore, we cannot interpret Section 50 in the light of the proposed amendment.

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July 2021