Interest on Cash payment of Liability

[Harshit Sanghvi]

Hi Everyone,

There was a differential liability of FY 17-18 in GST which we got to know while doing audit. We paid the liability in Cash with interest till the date of payment of challan but did not file DRC 03 for the same. DRC was filed after 2 months of challan payment.

Now the officer is asking for interest till the date of DRC but we want to pay interest only till the date of payment . Kindly share favorable case laws.

Thanks in advance

[KASTURI SETHI]

There is no revenue loss at all. The view of the department is not correct. No such case law is possible on this issue. Interest is always compensatory in nature----Supreme Court. Very famous judgement. This case law pertains to the period prior to GST. Still this can help you.

[Akash Deep]

i agree with the views of kastury ji, DRC 3 is only a declaration for the payment, which is only a procedural requirement. as there is no loss of revenue, interest cant be charged till be date of filing of DRC-3. at the maximum department can levy, if provisions requires so, some penalty or late fee for not filling DRC-3 on time.

further there is no provision under the CGST Act, to charge interest for a period which is beyond the actual date of payment of tax. jurisprudentially, existence of any such provisions would be wrong and illegal on every test of rule of law.

[KASTURI SETHI]

Nicely explained by Sh.Akash Deep Ji. Peerless. No match. Sir Welcome back to TMI. 'Your Home Coming' indeed.

[Ganeshan Kalyani]

Sri Akash Deep Ji, Welcome back to TMI. We were missing your participation in this Discussion Forum.

[Akash Deep]

thank you Kasturi ji and ganeshan ji. people like you motivates me to write more. well, i have decided to contribute regularly. hoping for more constructive discussion.

[KASTURI SETHI]

Sh.Akash Deep Ji,

Really all will relish your contribution/knowledge. You never restrict to the query only but also examines various involved/linked/hidden in the query itself. What is worthwhile to mention that sometimes even the querists do not know the hidden issues involved in the query itself. We can term it as unveiling the layers.

AI Summary

Interest on tax payment should be limited to the period up to actual payment, not extended by later declaration filing. Interest on a discovered GST liability paid in cash should be limited to the period up to actual payment; filing of DRC 03 later is a procedural declaration and, absent revenue loss, does not justify extending interest. The department may, however, seek late fees or penalties for delayed DRC 03 filing, but there is no express CGST provision to charge interest beyond the payment date.