Outward liability shown in GSTR9 and settlement of tax

[Sudhir Kumar]

One of my client has inadvertently missed to show complete sell /outward tax liability in GSTR-1. Hence no question of short payment arises. But later on he has shown excess outward supply in the GSTR-9 for the same period and paid applicable tax through DRC-03 but not paid the interest as he argued that he filed annual return and excess liability has been shown in annual return and tax paid accordingly. The matter pertains to 2017 18 and he filed annual return on 5.12.2020 while made payment on 20.12.2020. Whether liability shown in annual return instead of GSTR-1 is currect and whether he is liable to pay interest,as department sought. Please guide.

[GUNASEKARAN K]

Interest at rate of 18% payable for delay payment of Tax.

[KASTURI SETHI]

There is no escape route for saving interest. Interest is payable from the due date to the date of setting off liability. Rectifying the figures in Annual Return is allowed but mistake committed in GSTR-1 is an offence. This offence still exists even after showing correct figures in Annual Return. This offence is not covered up. Penalty imposable on account of procedural lapse/technical lapse.

[Sudhir Kumar]

But the client say he has paid the tax liability through ITC only not by cash, so no question of interest arise.

[Sudhir Kumar]

But the client say he has paid the tax liability through ITC.

[KASTURI SETHI]

Were proceedings initiated against your client under Section 73 or 74 of CGST Act ?

[Sudhir Kumar]

Only ASMT10 has been issued

[KASTURI SETHI]

What is the date of Form GST ASMT-10 ?

Whether any letter was issued prior to the issuance of Form GST ASMT-10 ?

[KASTURI SETHI]

In simple terms, if Section 73 or 74 is involved, interest has to be paid. No benefit of the clause ''interest has to be paid only on cash payment of tax.' is available in that situation.

Pl. read carefully the following relevant extract of Section 50(1) of CGST Act and Rule 88 B of CGST Rules :-

Section 50(1) of CGST Act

"[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.]"

Rule 88 B of CGST Rules

"(1) In case, where the supplies made during a tax period are declared by the registered person in the return for the said period and the said return is furnished after the due date in accordance with 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, the interest on tax payable in respect of such supplies shall be calculated on the portion of tax which is paid by debiting the electronic cash ledger, for the period of delay in filing the said return beyond the due date, at such rate as may be notified under sub-section (1) of section 50."

The term 'Any proceeding' will encompass within its fold the investigation proceedings.

[Sudhir Kumar]

No. ASMT 10 has been issued, the payment has been made voluntary and during verification of DRC 03 of the said payment it came to the knowledge of department. Whether interest is applicable while he paid all his liability through DRC 03 by debiting ITC ledger.

[Padmanathan KV]

He is liable to pay interest. Consider the following:-

1. What is the time of supply? it must be in 17-18.

2. The said supply has to be declared in GSTR-1 and pay tax on GSTR-3B of subsequent month.

3. He has declared only in 5-12-2020.

Therefore, he is liable to pay interest under section 50(1) from 21st day of Month is para 2 above to 5-12-2020.
 

[Padmanathan KV]

The proviso to section 50(1) is not at all applicable here. The proviso reads as under:

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.

In this case, the supply is not declared in the return for the said period.

AI Summary

Interest on delayed GST payment applies despite correction in annual return when supplies were omitted from monthly returns. Whether interest is payable where outward supplies omitted from monthly returns were later disclosed in the annual return and tax paid by debiting ITC via DRC-03. Correcting figures in the annual return does not remove the procedural lapse of not reporting in the monthly return. Interest for delayed payment is chargeable under the statutory interest provision and Rule 88B; the proviso limiting interest to tax paid from the electronic cash ledger applies only when the late return is filed before commencement of assessment or investigation and when the supplies were declared in the return for that period. Use of ITC does not, by itself, negate interest liability.