Benefit of net tax liability

[Atul Mehrotra]

Dear experts.

A taxpayer dealing in tobacco products failed to report cess on outward supplies for the month of July 2017 to the tune of ₹ 25 lakh both in GSTR-3B & GSTR-1. During departmental audit, the issue was taken up and interest was demanded till date on ₹ 25 lakh. Balance of ITC on cess as on 31 March 2018 was ₹ 13 lakh and ITC pertaining to July 2017 was ₹ 1.5 lakh.

Query 1 - What would be the manner of calculation of interest if benefit of ITC is given?

Query 2 - What would be the manner of calculation of interest if section 74 is invoked?

AI Summary

Taxpayer Faces Interest on Unreported Cess; Sections 73 & 74 GST Act Discussed for Penalties and ITC Use. A taxpayer dealing in tobacco products failed to report a cess of 25 lakh in July 2017, leading to interest demands during a departmental audit. The discussion explores the calculation of interest with and without the benefit of Input Tax Credit (ITC) and the implications of invoking Sections 73 and 74 of the GST Act. It is clarified that the taxpayer can use accumulated ITC to pay the cess, but interest must be paid on the gross amount from the due date, with no benefit of net tax liability. If a Show Cause Notice (SCN) is issued, penalties vary depending on whether Section 73 or 74 is invoked.