CAN GST DEPARTMENT IMPOSE PENALTY ON INTEREST ON DELAYED PAYMENT OF TAX FOR FY 2018-19

[anil sharma]

I HAVE RECEIVED SCN U/S 73 FOR FY 2018-19 FOR NON PAYMENT OF INTEREST OF RS 204/- AND IMPOSES PENALTY OF RS 10000/- WHAT TO DO ?

[Padmanathan KV]

If you pay the interest within 30 days of issance of SCN u/s 73, no penalty shall be levied. Section 73(8) is reproduced for your easy reference:

(8) Where any person chargeable with tax under sub-section (1) or sub-section (3) pays the said tax along with interest payable under section 50 within thirty days of issue of show cause notice, no penalty shall be payable and all proceedings in respect of the said notice shall be deemed to be concluded.

[KASTURI SETHI]

Laws have been framed for welfare of public and safeguard of Govt. revenue. "SUCH" SCN is neither the intention of Govt.nor legislature. Whosoever will read it, will be amused. No amount of logic can justify such proposal for imposition of penalty.

[Shilpi Jain]

No penalty can be imposed on the amount of interest. The penalty referred in section 73 is on the amount of tax demanded.

[Amit Agrawal]

Hey Ram!!!

I agree with views of all my fellow professional colleagues!

[anil sharma]

Thank you so much to all sir..... This is the only platform which gives fast reply....... Thank you once again

[anil sharma]

Sorry Amit ji sir.......

[Alkesh Jani]

Shri

My view with respect to query raised is that, you have made payment of tax but not interest, as per Section 73 (8) you were required to pay tax along with interest, as you have not paid interest, as per Section 73(7) it can be said as short payment of amount (here amount word is used means tax+interest+ penalty, if any), therefore SCN is issued and penalty of Rs. 10,000/- in terms of Section 73(9) is proposed.

Further, as stated by you that, interest is Rs.204/- amount of tax will be much less, therefore, whichever higher i.e. Rs.10,000/- is proposed in SCN. There are decisions available to contest the same, if you wish to, with help of expert near you.

Thanks

[KASTURI SETHI]

Interest is part of tax, it (tax) being delayed.. Interest is not independent of tax. Interest cannot exist without tax. If tax is delayed, then interest is demanded otherwise not. Penalty can be imposed upon the defaulter for non-payment of interest. it being an integral part of tax in this scenario.

[KASTURI SETHI]

Interest is a part of tax---Orissa High Court

P.K. ORES PVT. LTD. Versus COMMISSIONER OF SALES TAX - 2022 (5) TMI 1293 - ORISSA HIGH COURT

[Padmanathan KV]

I agree with views of ld. Alkesh ji and ld. Kasthuri sir. Penalty is not levied on interest here. It is paid on short payment of tax (i.e. the belated payment) without the payment of interest. Since you have received notice recently, I would suggest you pay Rs.204 and close the matter for once and for all. Penalty shall be automatically dropped if the interest is paid within 30 days of notice.

[anil sharma]

Thank you sir ji

[Amit Agrawal]

Dear Querist Shri Anil Sharma Ji,

As a practical measure, one can pay asked interest of Rs. 204/- within 30 days of SCN and get relief u/s 73 (8) (against penalty proposed presumably u/s 73 (9)). All other things can be seen more as an academic discussion.

Dear Fellow professional colleagues,

My two cents on ongoing interesting discussion:

A. Without quantification of short-paid taxes, can Dept. issue notice u/s 73 only for interest u/s 50 (1) ...... using sub-section (7)? (In my view, yes)

B. Without quantification of short-paid taxes (followed of its determination via adjudication), can notice u/s 73 be issued by Dept. for imposing penalty u/s 73 (9) ......... or whether, even when same is not quantified while issuing SCN & adjudication thereof, does minimal penalty of Rs. 10,000/- u/s 73 (9) becomes automatic & thereby, payable? (In my view, no)

C. Whether due date of paying taxes for period from July, 2017 to March, 19 is lapsed and if yes, when?

My views: Due-date of paying taxes u/s 39 (7) is specifically linked with 'Due date of filing return u/s 39 (1)'. We hold a view that 'Due Date' of payment of taxes (as per Section 39 (7)) for the period from July, 17 to Mar, 19 has not lapsed considering various notifications issued in those period which is extended time-limit to file return u/s 39 (1) (For examples: Notification No. 58/2017-Central Tax, dated 15th November, 2017, Notification No. 44/2018-C.T., dated 10-9-2018, as amended from time to time) AT-LEAST till 08.10.2019.

And I hold this view despite Apex Court ruling in UNION OF INDIA & ORS. VERSUS AAP AND COMPANY (2021 (12) TMI 840 - SUPREMECOURT) and assuming that said ruling is legally correct. And this is despite retrospective amendment carried in Rule 61 via Notification No. 49/2019 – Central Tax dated 09-10-2019w.e.f. 01-07-2017.

Hence, question of paying interest u/s 50 (1) for period till 08.10.2019 - against liability of the period from July, 2017 to March, 2019 - does not arise, in my humble view.

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

[KASTURI SETHI]

Sh.Amit Agrawal Ji,

In view of your replies, I have no hesitation in inferring that you have been blessed by God with untiring and limitless stamina. Rather, I shall term your potential as phenomena. Really, I feel ecstatic.

[Amit Agrawal]

Thank you, Shri Kasturi Sethi Ji, for your kind words!

[anil sharma]

Thanks to all of you.....

AI Summary

Show cause notice under Section 73 for unpaid interest; pay within 30 days to avoid Rs. 10,000 penalty. A forum participant received a show cause notice (SCN) under Section 73 for FY 2018-19 due to non-payment of interest amounting to Rs. 204, with a proposed penalty of Rs. 10,000. Responses suggest that paying the interest within 30 days will negate the penalty. Some argue that penalties cannot be imposed solely on interest, while others emphasize that interest is integral to tax. The discussion includes interpretations of GST laws, with suggestions to resolve the issue by paying the interest promptly to avoid penalties, while also addressing broader legal implications and procedural questions.