Late Discharged of Liability in GSTR 3B

[meil megha]

Dear experts

we have disclosed the liability by filing GSTR-1 but we have disclosed the liability in GSTR 3B in later months after due date . We were having sufficient ITC balance for the entire period since disclosure of short liability till disclosure of same in the later months and the liability has been discharged by utilization of GST credit and not by cash. So as per the proviso of section 50 (1) of Central Goods and Service Tax Act the interest will it applicable.

[Ganeshan Kalyani]

Since you paid thru credit ledger, interest is not applicable.

[Altamush Zafar]

Where in GSTR-3B you have paid taxes in later months than the month in which you disclosed in GSTR-1. Interest will be payable. For example liability disclosed in April month GSTR-1 but taxes paid through May month GSTR-3B - Interest payable even if paid thorough credit ledger

[Shilpi Jain]

Strictly going as per section 50 interest will still be applicable.

However applying the judicial precedents on the matter of interest it can be said that interest will not be applicable.

[Amit Agrawal]

Payment of taxes under gst is linked to debit in electronic cash / credit ledgers.

Section 50 (1) reads as under:

"Every person who is liable to pay tax in accordance with the provisions of this Act or the rules made thereunder, but fails to pay the tax or any part thereof to the Government within the period prescribed, shall for the period for which the tax or any part thereof remains unpaid, pay, on his own, interest at such rate, not exceeding eighteen per cent., as may be notified by the Government on the recommendations of the Council.

2[Provided that the interest on tax payable in respect of supplies made during a tax period and declared in the return for the said period furnished after the due date in accordance with the provisions of section 39, except where such return is furnished after commencement of any proceedings under section 73 or section 74 in respect of the said period, shall be payable on that portion of the tax which is paid by debiting the electronic cash ledger.]"

While proviso allows, subject to conditions specified therein (i.e. except where such return is furnished after commencement of any proceedings under section 73 or section 74), to levy interest only on that portion of the tax which is paid by debiting the electronic cash ledger. But, as per the beginning part of said proviso, one needs to declare such tax liability while filing return (i.e. GSTR-3B) for the tax-period when such liability arise.

However, Section 39 (9) of the CGST Act, 2017 permits 'rectification' subject to certain conditions and but also subject to payment of interest.

So, on plain reading of these provisions, interest is payable. But, there is decent chance for Court (specially, high court) to quash interest-liability on following two grounds:

A. Interest is compensatory in nature and in given situation, Govt. is not deprived of any revenue due to delay in beit in electronic credit ledger;

B. Co-joint reading of proviso to Section 50 (1) read with Section 39 (9) means that there is no delay in paying taxes when ITC ledger balance was sufficient constantly in between tax-period/s.

However, one cannot be certain whether court will go with very strict interpretation of legal provisions / rules or take holistic approach keeping in mind above two grounds.

All above are strictly personal views of mine and the same should not be construed as professional advice / suggestion in any way.

[Ravinesh Sinha]

There is interest liability without any dispute.the department may issue SCN for penalty if tax is not paid under 30 days under section 73(11) which is as under

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.

[KUMAR Narasimhan]

Dear Sir/Mam

From the above case, if we approach the court is there any possibility for not paying Interest. Also new Rule 88B(2) strictly phrase about Interest. Please clarify.

AI Summary

Interest on delayed GST liability may arise even when liabilities are paid using input tax credit, subject to proviso exceptions.
The proviso to Section 50(1) limits interest to tax paid by debiting the electronic cash ledger, but its application requires declaration in the return for the relevant period; Section 39(9) permits rectification subject to interest. On a plain reading interest is payable where liability is discharged after due date even if paid through ITC, though arguments based on the compensatory nature of interest and a conjoint reading with rectification provisions may persuade courts to quash interest where ITC was continuously sufficient and government revenue was not deprived.