73(5) Voluntary GST Payment

[Bayyareddy DK]

Dear Sir/Madam,,

I have utilised input tax for the fy 19-20 and filed monthly and annual returns in time. I came to know now that input should have not been utilised. Voluntarily on 5/7/21, i paid tax along with interest U/s. 73(5) at 24%. The office incharge called me today and asking penalty amount as it is paid after filing of annual returns. Is this penalty has to be paid even if taxes paid voluntarily before issue any notice.? Please advice

[Rajagopalan Ranganathan]

Sir,

According to Section 73 (5) & (6) of CGST Act, 2017

(5) The person chargeable with tax may, before service of notice under sub-section (1) or, as the case may be, the statement under sub-section (3), pay the amount of tax along with interest payable thereon under section 50 on the basis of his own ascertainment of such tax or the tax as ascertained by the proper officer and inform the proper officer in writing of such payment.

(6) The proper officer, on receipt of such information, shall not serve any notice under sub-section (1) or, as the case may be, the statement under sub-section (3), in respect of the tax so paid or any penalty payable under the provisions of this Act or the rules made thereunder.

Therefore the Department cannot demand penalty in your case. If the Department issues notice for recovery of penalty the same be contested.

[Bayyareddy DK]

Sir,

73(11) Notwithstanding anything contained in sub-section (6) or sub-section (8), penalty under sub-section (9) shall be payable where any amount of self-assessed tax or any amount collected as tax has not been paid within a period of thirty days from the due date of payment of such tax.

How to understand "due date of payment of such tax". whether it is 3b due date or annual return due date? Please advice

or the officer is talking about Section 125 penalty?

[KASTURI SETHI]

Section 125 of CGST Act is not in picture in this scenario. Late fee and penalty are different terms. 'Due date of payment of tax' does not stand for Annual Return. Here it talks of the due date of GSTR 3B. I agree with the views of Sh.Ranganathan, Sir.

[Narendra Nimmala]

Mr Bayyareddy,

In addition to the replies mentioned above, please note that the rate of interest is 18% under all scenarios under GST. While the 24% interest is notified, the same is applicable only in cases of GSTR 2A vs GSTR 3 issues, envisaged under the scenarios of GSTR 1, GSTR 2 and GSTR 3 returns, which are currently not introduced. Hence, interest of 18% needs to be paid.

Trust this reply is helpful wrt future liabilities.

[KASTURI SETHI]

I agree with Sh.Narendra Nimmala Ji. Otherwise 24% is chargeable where mala fide intention is involved.

[Bayyareddy DK]

Sir,

(11) Notwithstanding anything contained in sub-section (6) or sub-section (8), penalty under sub-section (9) shall be payable where any amount of self-assessed tax or any amount collected as tax has not been paid within a period of thirty days from the due date of payment of such tax.

It has been clarified vide circular no 76/50/2018 - GST dated 31-12-2018 that provisions of section 73(11) of CGST Act are invoked only when Section 73 is invoked. Incase of delay filing form 3B, Section 73 cannot be invoked as tax is paid along with the return. In that case penalty under section 73(11) of CGST act cannot be imposed.

However, general penalty under section 125 of the CGST act for contravention of the provisions of the CGST Act can be imposed after following due process of law. The maximum penalty under section 125 is ₹ 25000 under CGST act plus ₹ 25000 under SGST.UTGST Act.

[KASTURI SETHI]

In this scenario, general penalty is not imposable inasmuch as provision for specific penalty is there. If penalty cannot be imposed under Section 73 (11), it does not mean penalty is imposable under Section 125. Section 125 is meant for those contraventions for which no penalty is separately provided for in this Act.

[YAGAY andSUN]

We endorse the views of our experts.

[SHARAD ANADA]

Pl refer Circular No. 76/50/2018-GSTF. No. CBEC-20/16/04/2018-GST Sl No 2 clarification No.3. I reproduce the same hereunder;

2.Whether penalty in accordance with section 73(11) of the CGST Act should be levied in cases where the return in FORM GSTR-3B has been filed after the due date of filing such return?

1. As per the provisions of section 73(11) of the CGST Act, penalty is payable in case self-assessed tax or any amount collected as tax has not been paid within a period of thirty days from the due date of payment of such tax.

2. It may be noted that a show cause notice (SCN for short) is required to be issued to a person where it appears to the proper officer that any tax has not been paid or short paid or erroneously refunded or where input tax credit has been wrongly availed or utilised for any reason under the provisions of section 73(1) of the CGST Act. The provisions of section 73(11) of the CGST Act can be invoked only when the provisions of section 73 are invoked.

3. The provisions of section 73 of the CGST Act are generally not invoked in case of delayed filing of the return in FORM GSTR-3B because tax along with applicable interest has already been paid but after the due date for payment of such tax. It is accordingly clarified that penalty under the provisions of section 73(11) of the CGST Act is not payable in such cases. It is further clarified that since the tax has been paid late in contravention of the provisions of the CGST Act, a general penalty under section 125 of the CGST Act may be imposed after following the due process of law.

[SHARAD ANADA]

I also agree that rate of Int is only 18% and not 24%.. Here in 73(5) talks about before SCN pay the amount of tax along with interest payable thereon under section 50 on the basis of his own ascertainment of such tax or the tax as ascertained by the proper officer and inform the proper officer in writing of such payment.

So in your case you have paid tax along with interest (it should be 18%) and file DRC 03 matter is over.

Please refer Sec 73(6) The proper officer, on receipt of such information, shall not serve any notice under sub-section (1) or, as the case may be, the statement under sub-section (3), in respect of the tax so paid or any penalty payable under the provisions of this Act or the rules made thereunder.

So in your case proper officer may not serve SCN for tax and even for penalty.

AI Summary

Taxpayer Avoids Penalty for Voluntary GST Payment Under Section 73 of CGST Act; Correct Interest Rate is 18% A taxpayer voluntarily paid GST along with interest after realizing they incorrectly utilized input tax for the fiscal year 2019-2020. The taxpayer was later asked by an officer to pay a penalty since the payment was made after filing annual returns. Experts on the forum clarified that under Section 73(5) and (6) of the CGST Act, no penalty should be imposed if the tax is paid voluntarily before any notice is issued. They also noted that the interest rate should be 18%, not 24%. The discussion further explored the applicability of penalties under different sections, concluding that a general penalty under Section 125 is not applicable in this case.