Interest calculation in GST

[anuja bhandari]

If the total GST liability is 10 Lacs for Aug 2018, Eligible ITC availed is 7 Lacs, Balance challan paid on 25 Sept 2018 with interest calculated on 3 lacs for 5 days delay. Return filed on 25 Sep 2018. Whether interest to be calculated on full liability of 10 lacs or Challan payable amount of 3 lacs?

[Nitika Aggarwal]

Dear Sir,

As per provisions contained in Section 50 of CGST Act, 2017, Interest shall be paid on full amount i.e. ₹ 10 Lacs for 5 days delay in return filing. For the sake of easy reference, the relevant extracts from the aforesaid section is reproduced herein below:-

Interest on delayed payment of tax

50. (1) Every person who is liable to pay tax in accordance with the provisions of this Act or the rules made thereunder, but fails to pay the tax or any part thereof to the Government within the period prescribed, shall for the period for which the tax or any part thereof remains unpaid, pay, on his own, interest at such rate, not exceeding eighteen per cent., as may be notified by the Government on the recommendations of the Council.

Regards

Nitika Aggarwal

9999804960

[CA Hemanth Kumar]

Dear sir,

In terms of section 49 of CGST Act, 2017, payment of tax shall be said to be made only when the electronic liability register has been credited after making debits in electronic cash ledger or electronic credit ledger. Further it is important to note that, the electronic liability register can be credited only at the time of filing the monthly return, i.e., GSTR-3B / GSTR-3.

Another school of thought

Interest for the delayed payment of tax is considered to be levied for the reason that there would be a loss to Government, to the extent of such delay. However, in cases where there is sufficient balance in electronic cash ledger and electronic credit ledger and such credit is reflecting in GSTR-2A there would be no loss to the treasury.

When this fact is taken into account the law is against the basic philosophy behind levy of interest. This could be challenged by filing writ petition.

[KASTURI SETHI]

Dear Querist, .Debit entry of RS.7 lakhs from Electronic Credit Ledger during the tax period is must. If you fail to do, interest is chargeable.

[DR.MARIAPPAN GOVINDARAJAN]

Since the tax is paid after 5 days interest is payable on the full amount.

[anuja bhandari]

Thank you all for you valuable opinion.

However, I am unable to understand where in the Act is it mentioned that interest will be levied on the entire output tax amount. Section 50 mentions 'to pay tax' , there is no clarification whether 'to pay tax' means net liability after tax or full output liability.

In addition the amount in ITC in Electronic Credit Ledger is not something I can remove or take refund of (considering I do not fall in Sec 54/55 refund provisions), the ITC is with the Government. Only because of the machinery provision of filing of a GSTR 3B return that it needs to be debited could be questioned.

Also, in case of high volume output tax of a taxpayer where ITC is in excess and delay of filing return due to some unavoidable reason, the interest could be exponentially high just because the return was delayed. Wherein the taxpayer is paying prescribed late fee for filing the return.

Please let me know if any views on the above. Appreciate the responses. Thank you.

[Ganeshan Kalyani]

Pay tax means ₹ 10 lacs. It can be paid by two way that is either by cash or by input tax credit. Thus the provision which states that tax has to be paid is not complied by you. Hence interest becomes payable on ₹ 10 lacs. This is the law which is apparent in this case. However , you can take your own stand as you said that there was input tax credit of ₹ 7 lacs. Then interest should be on ₹ 3 lacs only. The assessing authority will go by law. The appeal authority may accept your stand. But by that time your litigation cost would have burnt your pocket. So it is good to comply the provision at the first instance itself.

AI Summary

Interest on delayed GST payment applies to full output tax until the liability is discharged by ledger credit.
The question is whether GST interest for delayed payment is chargeable on full output tax or only on net liability after input tax credit. Respondents rely on the rule that interest accrues on tax remaining unpaid and that payment is effected when the electronic liability register and ledgers are debited. One position treats failure to debit credit during the period as attracting interest on the full output tax until ledger discharge; an alternative argument is that available input credit reflected in ledgers negates loss to the treasury and thus the interest premise, a point potentially open to legal challenge.