INTEREST ON GST- DELAYED TAX

[ARVIND JAIN]

ITC Balance - 31.03.2021 - ₹ 5 lakhs ( ALL ITC DUE TO EXCESS INPUT NO TAX PAID IN CASH IN ALL CASES )

ITC Balance - 30.04.2021 - ₹ 3 lakhs

ITC Balance - 31.05.2021 - Rs.NIL

ITC Balance - 30.06.2021 - ₹ 1 lakh

Let's assume there is neither output tax liability nor any ITC for the month of July 2021 and also assume that interest is payable only on Net tax liability.

Now, few missed out B2C invoices of MARCH 2021 having output tax liability of ₹ 3.50 lakhs are considered in GSTR 1 and GSTR 3B pertaining to tax period July 2021 and tax was paid on 20.7.2021. Please confirm that interest shall be chargeable on ₹ 50,000 for the period 1.5.2021 to 31.05.2021 and on ₹ 3.50 lakhs for the period 01.06.2021 to 30.06.2021 and
on ₹ 2.50 lakhs for the period 01.07.2021 to 20.07.2021. ( Assuming interest on Net Itc payment )

OR have to pay interest directly on 3.50 lakh from 22.04.2021 being due date of march return to 20 July 2021.

AI Summary

Interest on net tax liability: chargeability limited to cash-paid tax and to utilized ineligible ITC, pending formal notifications.
Whether GST interest is computed on the net cash tax liability or on the gross tax for supplies of an earlier period declared later: departmental reading of the proviso to section 50(1) confines interest to the portion paid by debiting the electronic cash ledger, so interest is charged on the cash-paid portion and not on the entire attributable tax; interest is not compounded. The GST Council press release proposes a retrospective amendment to charge interest only on ineligible ITC that has been availed and utilized, but legal effect awaits formal notification.