Interest to be levied only on net cash liability of GST

Recently, section 50 of Central goods and services tax act was amended to provide that interest will now be charged on only that portion of the GST liability which is paid by debiting the electronic cash ledger.

The present rate of interest on the delayed payment of tax liability is 18% per annum on unpaid GST. Presently, such interest is charged on all modes of payment of tax, even when actual cash has not been paid, but input tax credit has been used instead. This provision is harsh if the taxpayer had ITC to set off a tax liability. Since the GST on input goods/services is paid well before the final output good/service has been made, it was unreasonable and unfair to charge interest on ITC portion as well.

The 31st GST Council meeting recommended changing this Law to provide that only the net liability of a taxpayer would be subjected to interest. This amendement was put in the finance bill, 2019 which was passed in Lok Sabha on July 18, 2019.