Interest to be paid on net GST with effect from September 1

Finance Ministry has fixed September 1 as appointed date for charging interest on delayed payment of net GST liability.

Net liability refers to gross tax liability minus input tax credit. The GST Council had approved a retrospective amendment but the notification currently has only been issued for the go forward period. There are diverse opinions over this notification. Some experts feel that select taxpayers will get the benefit and there could be more litigation. However, some think that this will help assesees deal with due tax cases.

Central Board of Excise & Custom (CBIC), the key policy making body for indirect taxes under Finance Ministry, issued the notification saying “Central Government hereby appoints the 1st day of September, 2020, as the date on which the provisions of section 100 of the Finance (No. 2) Act, 2019 (23 of 2019), shall come into force.”

Section 100 of Finance Act, 2019 amends Section 50 of the CGST Act. Original section talks about interest on delayed payment of tax. Every person, who is liable to pay tax but fails to do so within the prescribed time limit, will be required to pay interest at the rate of 18 per cent.

Post amendment a new proviso has been added in this section which says, “Provided that the interest on tax payable in respect of supplies made during a tax period and declared in the return for the said period furnished after the due date in accordance with the provisions of section 39, except where such return is furnished after 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.”

Section 39 of CGST Act deals with filing of returns while section 73-74 prescribe mechanism for determination of tax not paid or short paid or erroneously refunded or input tax credit wrongly availed or utilised for any reason other than fraud or any wilful misstatement or suppression of facts.

A section of experts felt that notifying the date is good for future. However, there is no relief since 2017. Also, only select taxpayers get a relief where there is a delay in filings. There will be another round of litigation on this.

Commenting on notifying the appointed date, Abhishek Jain, Tax Partner with EY said, while this definitely would help businesses for go-forward dues, with the GST Council having approved a retrospective amendment to interest being applicable on net liability, businesses would now await retrospective prescription for this. “The retrospective notification becomes all the more imperative to subside multiple notices which were issued by the revenue authorities demanding GST on gross liability," he said.

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