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

Interest on unpaid cess must be paid from the original due date on the gross liability; cess ITC may only discharge cess.
The taxpayer may utilise accumulated cess-specific input tax credit only for payment of cess under the proviso to Section 11(2) of the GST Cess Act; interest on unpaid cess runs from the original due date and is calculated on the gross unpaid cess with no benefit of net tax liability when suppression or mis-declaration invoke enhanced provisions. Under Section 73, payment of tax and interest within the prescribed period after a show cause notice avoids penalty; under Section 74, a penalty component applies and prospects for waiver are limited.