Interest rates under CGST Act.

[Alkesh Jani]

Sir,

In terms of Section 50 (3) of CGST Act, If ITC is wrongly taken or utilized, on reversal interest @ 24% is to be paid. However, if refund is delayed for more than 60 days, interest rate @6% will be paid in terms of Section 54(12) of CGST Act, 2017.

Moreover, in terms of Section 2(84) of CGST Act, 2017, person includes Central Government or State Government.

The query is :- Section 54(12) of the Act, can be held to be ultra vires to Article 14 of Constitution of India.

Thanks

AI Summary

Interest Rate Differential: higher statutory interest on reversed ITC operates as deterrent and is not arbitrary under Article 14
Section 54(12) of the CGST Act allows a lower interest rate on delayed refunds than the higher interest charged for wrongly availed input tax credits; the differential is defended as a permissible policy measure serving as a deterrent, with rates borne out by delegated notifications. The statutory scheme does not fix a maximum interest rate, and challenge under Article 14 requires evidence that the prescribed rate is arbitrary or causes undue hardship. Inclusion of governments within the definition of "person" and instances where governments incur interest liabilities weigh against a finding of unconstitutional discrimination.