CA Venkat Prasad. P & CA Ajay M
Background:
The interest liability for any belated remittance is an economic consequence. The tax laws are no exception to this rule. GST law provides for interest @18% on the delayed remittance of the tax after due date. However, there was an ambiguity as to whether the interest has to be paid on Gross Tax liability (i.e. the total output tax) or on the Net Tax Liability (the Tax liability to be paid in cash after adjusting the Input Tax Credit).
When the department started demanding the interest on Gross tax, the same was challenged before various High courts. The Hon’ble HC of Telangana initially held that the interest has to be paid on Gross Tax Liability which was subsequently reopened the matter by admitting the review petition and other HC’s have granted interim stay against the recovery.
Meanwhile, the Government has proposed an amendment to specify that the interest is only on the net tax liability. However, the same was not notified yet leaving a room for confusion on its effect prospectively/retrospectively. The department started issuing notices/letters & initiated recovery proceeding by attaching bank accounts to recover the interest directly from the Bank accounts of the taxpayers. Further, CBIC twitter handle has tweeted to say that aforesaid amendment will be prospective & till the amendment is made effective the interest has to be paid on Gross tax Liability. In this process, certain taxpayers have filed writ petitions contesting the demands and got a stay while some taxpayers paid/recovered by the revenue department.
Recently, the GST Council in its 39th Meeting has proposed for retrospective amendment to specify that the interest will be paid only on the net tax liability. The statutory effect of retrospective amendment is awaited.
Consequences & Course of Action:
The proposed retrospective amendment is certainly huge relief to the taxpayers and avoids the unnecessary disputes.
Once the retrospective amendment is made, the suggested course of action for various scenarios is tabulated below:
| S.No. | Scenario | Suggested Course of Action |
| 1 | Received Notices / Letters for interest on ITC Component and payment is pending | Quote the retrospective amendment & get the proceedings dropped |
| 2 | Filed petitions before the Courts & pending | Quote the retrospective amendment & get proceedings set aside by the court |
| 3 | Paid interest on ITC component on own volition/recovered by the revenue department | Seek refund as and when the refund mechanism is prescribed along with the retrospective amendment. |
(For any feedback /queries mail to venkataprasad@hiregange.com/ajaykumar@hiregange.com)
Author Bio
Sir,
The interest has to calculate on Gross LIability(Output Tax) or Net Liability ( Output Tax – Input Tax)?
In my case, after set-off ITC, the net CGST liability is Rs.1,875 and the net SGST liability is Rs.2,70,342 which attracts 9% interest Rs.11 on CGST and Rs.1,533 on SGST as on 28-May-2020.
In GSTR 3B table 5.1, I can not fill the interest amount separately, If I fill Rs.11 in the CGST column the same amount automatically shows in the SGST column also.
Please guide me on how to fill the above interest amount separately in table 5.1 and set off the liability in GSTR 3B.
Thanks in Advance.
Ramu Govindarajulu.
ramu@simta.com
+91 948 701 9930