GST -Section 50 CGST Act, 2017 – Interest liability for delayed payment of GST on net cash tax liability

Prasanna Kumar Bisoi Vs  Union of India  (Orissa High Court)

In a recent ruling passed by Hon’ble Orissa high court, held that w.r.t. interest liability for delayed payment of GST under Section 50(1) of the CGST Act, 2017, is required to be paid on net cash tax liability in view of the decision taken by the GST council in its 39^th Meeting held on 14 March 2020.  The summary of the case is enumerated herein below:

Facts of the case:

• The grievance of the petitioner in this Writ Petition was that he is registered under Central Goods and Service Tax. He had filed the GST returns for the financial year 2017-18, 20018-19 and 2019-20 at a belated stage and availed Input Tax Credit at the time of filing GSTR-3B returns, as Works Contractor.

• The Superintendent, Central GST and Central Excise, Berhampur (“Respondent no. 3) demanded interest under Section 50 (1) of the CGST Act, 2017 in respect of the above three financial years on the head that demand of interest is payable on ITC set off.

• The Learned counsel for the petitioner submitted that in the 39th meeting of the GST Council held on 14 March 2020, it was decided that interest for delay in payment of GST is to be charged on the Net Cash Tax Liability w.e.f. 01.07.2017 retrospectively but not in the Input Tax Credit.

• The Learned counsel further submitted that the petitioner has filed a representation before the Respondent no. 3 with a prayer not to charge the interest on the availed Input Tax Credit and to drop the proceeding in view of the decision taken in the 39th meeting of GST Council. However, no action was taken till date.

Hon’ble Orissa High Court decision:

• The Hon’ble High court, held that the Respondent No.3 is directed to dispose of the representation filed by the petitioner keeping in view the decision taken in the 39th meeting of GST Council, as expeditiously as possible, preferably within a period of eight weeks from the date of receipt of this order. The decision is taken, if any, be communicated to the petitioner.

Author View:

• The proviso to Sec 50(1) of the CGST Act was first introduced vide Finance (No. 2) Act, 2019 dated 1 August 2019. It states that the interest on tax payable in respect of supplies declared late in the returns after the due date, except where such return is furnished after the 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 i.e. on the cash portion of tax payment only.

• However, the revenue-oriented approach of government, as witnessed by the Notification 01/2020 dated 1 Jan 2020, wherein the government notified many sections of the Finance Act, 2019, but kept section 100 of the said act w.r.t the said amendment in abeyance.

• Even after the decision taken by the GST council in its 39^th meeting, the government has forgotten to notify the said section. In wake of same, it is important to highlight that, the more government delay in notifying the section, the more the taxpayers would be involved in the umbrella of litigations.
• Now, the question arises that since such provision has still not been incorporated in the law, should the taxpayer’s discharge interest basis the said provision or should we wait till it gets notified. Hence, leading to big chaos and confusion in the taxpayer’s mind.

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FULL TEXT OF THE HIGH COURT ORDER /JUDGEMENT

Heard learned counsel for the petitioner and Mr.T.K.Satpathy, learned counsel for Central Excise.

2. The grievance of the petitioner in this Writ Petition is that he is registered under Central Goods and Service Tax having GSTIN No. 21AJIPB2032N1ZO. He has filed the returns for the financial year 2017-18, 20018-19 and 2019-20 at belated stage and availed Input Tax Credit at the time of filing GSTR-3B returns, as Works Contractor. The Superintendent, Central GST and Central Excise, Berhampur – opposite party No.3 demanded interest under Section 50 (1) of the C.G.S.T Act, 2017 in respect of the above three financial years for Rs.2,24,487/- on 04.03.2020 on the head that demand of interest is payable on ITC set off. Hence the present Writ Petition.

3. Learned counsel for the petitioner submitted that in the 39th meeting of GST Council held on 14.03.2020 it was decided that interest for delay in payment of GST is to be charged on the Net Cash Tax Liability w.e.f. 01.07.2017 retrospectively but not in the Input Tax Credit. He further submitted that the petitioner has filed a representation before the Superintendent, Central GST and Central Excise, Berhampur – opposite party No.3 on 06.05.2020 under Annexure:3 with a prayer not to charge the interest on the availed Input Tax Credit and to drop the proceeding in view of the decision taken in the 39th meeting of GST Council. However, no action has been taken as yet.

4. Considering the above, this Court disposes of this Writ Petition with a direction to the Superintendent, Central GST and Central Excise, Berhampur – opposite party No.3 to dispose of the representation filed by the petitioner on 06.05.2020 under Annexure:3 keeping in view the decision taken in the 39th meeting of GST Council, as expeditiously as possible, preferably within a period of eight weeks from the date of receipt of this order. The decision taken, if any, be communicated to the petitioner.

5. As the lock down period is continuing for COVID-19 learned counsel for the petitioner may utilize the soft copy of this order available in the High Court’s website or print thereof at par with the certified copy in the manner prescribed, vide Court’s notice No. 4587, dated 25.03.2020.