During the Inception period of GST era due to various reason like technical glitches in the portal, heavy load on the portal, assesses dependency on the portal’s offline utility, novel procedure to file the return etc. many assesses filled GSTR-3B belatedly when the portal resumed, or technical issue resolved or however they have deposited the tax liability in the credit ledger on or before the due date. As now GST department has started to scrutinise the GST returns filled by the assessee and started to issue notice/demand specifically for the above situation.

In the GST Act neither Section/Rules/Circular/Notification specifically deal such situation, nor any clarification has been issued by the department in this regard. To understand the statutory position regarding the applicability of interest on late filing of 3B on such situation we need to understand the various provision of the Act, which are summarized as below:

CGST Rules 2017, Chapter IX & X  : First of all, we needs to understand the procedure specified for GST payment & filing of the return under the CGST Rules 2017, Chapter IX & X. When assessee submit return the GST liability gets created & Debited to Electronic Liability Register. When assessee make payment from his bank account the amount gets deposited in the Electronic Cash Ledger (Credit to Electronic Cash Ledger). At the time of filing of the return the assesee offset the liability and the amount Debited to electronic Cash Ledger/Credit Ledger and credited to Electronic Liability Register.

Interest Liability In Case of Timely Payment & Late Filing of GSTR-3B

Here it is to be noted that the funds get debited from assessee’s bank account when he deposits the amount in credit ledger & reflect as Credited balance to electronic Cash Ledger. The credit balance is nothing but liability on the part of the government. This liability (credit to cash ledger) get offset (i.e. debit to cash ledger) when assessee file the return. So, no movement of fund happens at the time of debit to CL, neither at assessee’s bank account nor at government’s account.

Rule 87(6) & 87(7) of CGST Rule: “Rule 87(6) On successful credit of the amount to the concerned government account maintained in the authorised bank, a Challan Identification Number shall be generated by the collecting bank and the same shall be indicated in the challan.

(7) On receipt of the Challan Identification Number from the collecting bank, the said amount shall be credited to the electronic cash ledger of the person on whose behalf the deposit has been made and the common portal shall make available a receipt to this effect.”

It is very much clear that Challan Identification Number is generated only on successful credit of the amount to the concerned government account maintained in the authorised bank.

Thus, the actual movement of funds happen at the time of Credit-to-Credit Ledger and at the Debit to Credit Ledger is just procedural aspect to offset the liability and no movement of fund happens at that time.

Section 27 of CGST Act 2017 & Rule 13 of CGST Rule 2017: As per section Section 27(2)  “A casual taxable person or a non-resident taxable person shall, at the time of submission of application for registration under sub-section (1) of section 25, make an advance deposit of tax in an amount equivalent to the estimated tax liability of such person for the period for which the registration is sought”. Similarly, as per Rule 13(2) A person applying for registration as a non-resident taxable person shall be given a temporary reference number by the common portal for making an advance deposit of tax in accordance with the provisions of section 27 and the acknowledgement under sub-rule (5) of rule 8 shall be issued electronically only after the said deposit in his electronic cash ledger. When we read Section 27 with Rule 13 Advance deposit of Tax is made by such taxpayers by depositing the fund in credit ledger. In other words, deposit in credit ledger is treated as Advance Tax Deposit.

Sub-section (1) of section 77 of the CGST Act deals with a situation where CGST and SGST has been paid considering the supply “intra-State” and subsequently the same is held to be inter-State and, therefore, it is stipulated that in such situation the amounts of CGST and SGST, which were paid wrongly, shall be refunded and, of course, the registered person has to pay IGST on such supply for which no interest shall be required to be paid as stipulated under sub-section (2) of section 19 of the IGST Act.

So, it is very much clear that in case of wrong payment of tax based on erroneous determination of “Nature of Supply” as Interstate/Intrastate & letter-on rectified Interest is not required to be paid, the logic behind the same is that Actual Tax liability has been discharged even under wrong head.

Gujarat High Court verdict: The Hon’ble Gujarat High Court in case of Vishnu Aroma Pouching Pvt. Ltd. held that the petitioner has discharged the tax liability when he has deposited the tax in the credit ledger irrespective of the fat that he was not able to file the return due to technical glitches or hurdle in the GST Portal and return was filled belatedly. Accordingly, petitioner was relieved from payment of interest liability for delay in filing the return considering the fact that the tax liability was duly discharged by depositing the tax in the credit ledger.

As to conclude we can that that there should not be interest charged on late filing of GSTR-3B provided the GST amount has been deposited by the assessee on or before the due date. As in author’s opinion the deposit of Tax in cash ledger (Credit to Cash Ledger) is at par with payment of tax & debit to cash ledger is just an allocation of fund. The credit to cash ledger creates liability on the part of government & which get reduced at the time of filing of return (debit to cash ledger). It is like deposit of amount in bank account where credit entry create liability on the part of the bank.  However, it is always recommended not only to pay the tax on time but also file the return within due date to avoid any kind of litigation.

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Disclaimer: The view expressed hereabove are the strictly personal. The department or other adviser may have different opinion depending on their understanding of the statue. It is always recommended to consult your CA or Tax Adviser before taking any decision & author will not be responsible for any lose due to decision taken based on above article. 

You can reach Author at [email protected] or 9004485377.

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One Comment

  1. Vinod Daga says:

    Thanx for this writeup
    One thing more that we have to take refund of unutilsed cash balance from govt means we can’t fetch fund on our own. so one can justify that govt is not treating this is an idle money and using the same.

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