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The GST Council, which is meeting on May 28, is expected to consider lowering general rate of interest, technically known as general interest charges (GIC) which are levied on late payment of tax or claiming excess input tax credit (ITC).
As on date, these rates vary between 6 per cent and 24 per cent. However, during last fiscal and even this fiscal, the Finance Ministry lowered the rate or even waived it off in certain cases for a limited period. A senior Finance Ministry official told BusinessLine that this could be taken up as there is demand not just from some States but also from India Inc.
States believe that this can be considered as the overall interest rate regime has registered a reduction of up to two percentage points. Experts feel that the demand by a few States to cut down GST rates on account of interest rate reduction on bank deposits, loan etc, appears reasonable and may be worth deliberating at GST Council. It is logical as, generally, the rates under tax laws do have co-relation with the prevailing interest rates in the country, they said.
Harpreet Singh, Partner in KPMG, said that cue can be taken from interest rates on late payments prevalent overseas. Countries like Australia, France and Switzerland have penal interest rates under tax laws ranging from 2.4-7 per cent per annum. “Reducing the interest rate to match with some of these developed nations may boost the sentiments of Indian taxpayers, during these challenging times,” he said.
Ease challenges
Rajesh Gupta, Co-founder & CTO with BUSY Accounting Software, said lowering general interest rate is going to be a positive initiative by the GST council. If the rate reduction on a regular basis gets appoved by the government, it will help in easing the challenges faced by businesses. “Due to lockdown, we are witnessing slow liquidity and the economy has taken a hit in terms of growth and performance. Therefore, to support the affected business domain, the government should consider this move as a preventive measure to give the much-needed relaxation to the businesses during these tough times,” Gupta said.
Meanwhile, a section of India Inc also supports the view of lowering the interest rate as a long-term policy, while another section seeks extension of the recent lowering for a limited period to a longer period. One such representation made to Central Board of Indirect Taxes and Custom (CBIC) sought extending the interest and the late fee waiver for both small and large taxpayers on filling of GSTR 3B pertaining to the return period of April, 2021 May, 2021 and June 2021 till July 31 2021.
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