Can Tax be deemed to have been paid in time once interest is paid for delayed payment

[Somit Goyal]

In one of the case the Department is demanding interest from the recipient for claim of ITC where supplier have delayed in their payment of taxes citing the reason that you have claimed ITC earlier then the same becoming eligible. In such situation, if the Supplier has paid interest then one should be in a position to contest that taxes are deemed to have been paid in time. Can someone throw more light on this theory?

[Shilpi Jain]

This is the reason, it becomes important for one to analyse whether the conditions mentioned in section 16(2) are to be complied pre-availing of credit or can be post as well.

In my view payment of tax by supplier and disclosing them in GSTR-1 should be post facto conditions.

[KASTURI SETHI]

By paying interest on account of delayed payment of tax under GST law, you cannot treat it as paid in time.

I think in the Income Tax Act situation is different, income tax being direct tax.

[Shilpi Jain]

Sometimes the interest component for the same transaction becomes much much much higher than the tax due itself, due to the same being collected from supplier recipient 1, recipient 2 and so on .. for the same transaction..

There has to be a logical way out..

In my view the availing of credit before appearing in GSTR-2A should not attract interest when finally the invocie appears in GSTR-2A or 2b... Treating it as a pair facto condition

[Ganeshan Kalyani]

In my view the payment of interest for delay in payment of tax shall not deemed that tax is paid on time. However, the buyer is allowed to claim input tax credit whenever supplier makes the payment to Govt. with or without interest.

AI Summary

Payment of interest does not automatically make tax payment timely; credit arises when supplier actually pays and discloses it. Whether tax can be treated as paid in time for input tax credit is contested: some treat supplier payment and return disclosure as post-facto conditions that can regularise earlier credit; others hold that paying interest does not make the tax payment timely. Practically, credit becomes claimable only when the supplier actually pays the tax to the government and the transaction appears in the recipient's purchase-side returns.