GST Electronic Cash Ledger deposits via PMT-06 and delayed GSTR-3B filing: interest u/s50(1) limited to late deposits only

The dominant issue was whether depositing GST into the Electronic Cash Ledger (via PMT-06) within the statutory due date constitutes "payment of tax" so as to avoid interest under s.50(1) CGST Act, notwithstanding later filing of GSTR-3B. The HC held that ss.39(1) and 39(7) require tax to be paid to the Government not later than the last date for furnishing GSTR-3B, and remittance to the Government is not contingent on filing the return; treating ECL deposit as non-payment would contradict the scheme and impede utilisation of collections. Interest can arise only on the portion deposited after the due date. The impugned demand/communication was quashed and the petition was allowed.

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Issues Involved:
1. Challenge to Recovery Notice dated 16.05.2023.
2. Challenge to Order dated 12.07.2023.
3. Liability to pay interest on GST amount deposited in Electronic Cash Ledger (ECL).

Summary:

Issue 1: Challenge to Recovery Notice dated 16.05.2023
The petitioner, a renowned motorcycle manufacturer, challenged the Recovery notice dated 16.05.2023, demanding interest of Rs. 23,76,26,657/- for alleged belated payment of GST from July 2017 to December 2017. The petitioner argued that the tax was duly remitted to the Government's account through the Electronic Cash Ledger (ECL) within the due dates, and thus, no interest should be levied. The Department contended that the deposit in ECL does not amount to payment of tax until debited through GSTR-3B returns.

Issue 2: Challenge to Order dated 12.07.2023
Following an interim order by the Division Bench, the Department passed an order on 12.07.2023, confirming the demand of interest. The petitioner challenged this order, maintaining that the tax was paid on time and no interest liability should arise. The Department argued that the petitioner failed to file monthly returns on time, thereby attracting interest under Section 50 of the GST Act.

Issue 3: Liability to Pay Interest on GST Amount Deposited in ECL
The core issue was whether the petitioner is liable to pay interest on the GST amount deposited in ECL within the due dates. The petitioner argued that once the tax is deposited in the Government's account via ECL, it should be considered as payment of tax. The Department maintained that the tax is considered paid only when debited from ECL through GSTR-3B returns. The Court examined various provisions of the GST Act and concluded that the date of credit to the Government's account should be deemed the date of deposit in ECL. Thus, the tax liability is discharged upon deposit, and interest is applicable only for any delayed period beyond the due date for filing returns.

Judgment:
1. The credit to the Government's account occurs not later than the last date for filing monthly returns as per Section 39(7) of the GST Act.
2. Once the amount is paid via GST PMT-06, it is credited to the Government's account, discharging the tax liability to that extent. For accounting purposes, it is deemed credited to the ECL.
3. If GST is credited to the Government's account by the due date, the tax liability is discharged from the date of credit. Interest is applicable only for any delayed period beyond the due date.

The impugned Recovery notice dated 16.05.2023 and the order dated 12.07.2023 were quashed. The writ petitions were allowed, and no costs were imposed.

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