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Mere Availability of Balance in Electronic Cash/Credit Ledger can’t be assumed as payment of taxes unless it is debited

As per the provisions laid down in Section 50 of CGST Act 2017, every registered person who is liable to pay tax, but fails to pay the same within prescribed period, shall be liable to pay interest as per the rate notified by the Government. The interest is calculated on Net GST liability after adjusting Input tax credit (‘ITC’) i.e. on extent of cash payment effected.

Further please note that Interest will be leviable despite the availability of balance in cash/credit ledger if no payment was made. Judgement for the Case Law –India Yamaha Motor Pvt Ltd (‘The Petitioner’) Vs Assistant Commissioner (Madras High Court) can be referred for the same:

Facts:

The Petitioner failed to file the GST returns from the Tax Period August 2017 to October 2017. The department passed an order directing the payment of interest of INR 5 crores for belated payment of taxes post adjusting ITC available in electronic credit ledger.

Arguments by Petitioner:

The Petitioner contented that there was sufficient balance in cash and credit ledger during that tax period, so there is no loss to the revenue and no interest shall be levied.

Held:

The Tax payment happens only when the returns are filed and ledgers are debited towards the liability. Balance available in the Electronic Cash ledger is the property of the registered person and they can claim refund of the balance available at any point of time. Whereas the amount will go to the government only when the return is filed and amount is debited from the ledgers.

Unless the assesse files a return and debits the respective ledger the authorities cannot be expected to assume that available credits will be set off against the tax liabilities.

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