Only interest can be recovered under section 73 of GST

[Sudhir Kumar]

I have paid the differential amount of GST to the government before issuance of Show Cause Notice u/s 73. Now the department has issued Show Cause Notice for recovery of interest u/s 73. Whether only interest can be recovered by the department under section 73 of the CGST Act,2017.

[Sadanand Bulbule]

Dear querist

Since you have paid only the amount of tax but failed to pay interest much earlier to the commencement of adjudication proceedings under Section 73, you are not only liable to pay the applicable amount of interest but also liable to a penalty equivalent to ten per cent of tax or ten thousand rupees, whichever is higher under Section 73[9] of the Act.

In simple words, the pre-fixed amount of penalty is inevitably attracted consequent to non-payment of tax with interest [together] before the commencement of adjudication proceedings.

[Lav Prajapati]

yes, only interest can be recovered by the department under section 73 of the CGST Act,2017, becaus of, if differential amount of GST paid after due date as per, tax amount paid along with @18% of short amount as interest u/s 50 of CGST Act.

As per Sec.73(1) reade along with rule 142 of CGST Act ,Where it appears to the proper officer that any tax has not been paid or short paid or erroneously refunded, or where input tax credit has been wrongly availed or utilised for any reason, other than the reason of fraud or any wilful-misstatement or suppression of facts to evade tax, he shall serve notice on the person chargeable with tax which has not been so paid or which has been so short paid or to whom the refund has erroneously been made, or who has wrongly availed or utilised input tax credit, requiring him to show cause as to why he should not pay the amount specified in the notice along with interest payable thereon under section 50 and a penalty leviable under the provisions of this Act or the rules made thereunder.

[KASTURI SETHI]

I agree with both experts. The querist should have paid interest on its own. The querist has kept Govt.money in its pocket for the material period. So he can't escape interest. He should not have waited for SCN.

[Amit Agrawal]

SCN u/s 73 can be issued for 'any tax has not been paid or short paid or erroneously refunded, or where input tax credit has been wrongly availed or utilised for any reason, other than the reason of fraud or any wilful-misstatement or suppression of facts to evade tax'.

Considering you have paid differential taxes before SCN u/s 73, Dept. should ideally raise SCN demanding such taxes plus interest & penalty, while asking why amount already paid should not be appropriated against taxes demanded therein.

These are ex facie views of mine and the same should not be construed as professional advice / suggestion.

[Padmanathan KV]

Agreed with the views of experts. Ld Amit Ji has further clarified the position even further.

Kindly pay the interest within 30 days of notice to avoid the penalty.

AI Summary

Interest recovery under section 73 requires payment of interest, and nonpayment may attract penalty and further demand.
Interest is payable where differential tax is paid late, but a show cause notice under the recovery provision may require payment of the tax due together with interest payable under the separate interest provision and a penalty leviable under the Act or rules. Failure to pay interest before commencement of adjudication proceedings attracts penalty; the department may demand tax, interest and penalty and appropriate previously paid amounts against such demand.