iterest liability

[AMIT BATHAM]

One of my clients is a government contractor who completed road construction work for the central government in 2018-2019. The central government paid the basic amount but not GST because officials told the applicant that no budget was allotted for GST. The applicant paid GST in 2022-2023 from yourself and then approached the high court. After the high court order, the department paid the GST amount. The question now is whether the applicant is liable for interest or not because the PWD did not paid GST to the applicant

[Amit Agrawal]

Your client is liable to pay interest if there is delay in paying GST. Non-recovery / delayed recovery of GST from his Govt.-client (i.e. PWD) is not the relevant factor to determine liability to pay interest.

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

[Amit Agrawal]

IF client really wants to challenge interest liability, then, potential legal arguments can be as follows:

A. Due-date of paying taxes u/s 39 (7) is specifically linked with 'Due date of filing return u/s 39 (1)'.

A1. 'Due Date' of payment of taxes (as per Section 39 (7)) for the period from July, 17 to Mar, 19 is not yet 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). These notifications are not withdrawn till date.

A2. Once there is no delay by your client in paying taxes for FY 2018-19, there is no question of paying interest u/s 50.

B. However, I understand that this view about non-liability to pay interest, is expected to be highly controversial and definitely litigation-prone.

B1. Hence, one must take proper 'risks & reward analysis' as well as 'client's willingness to go through long drawn judicial process' before taking a final call to defend non-liability to pay interest in given situation.

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

[KASTURI SETHI]

Sh. Amit Batham ji,

(i) It appears that High Court Order is silent on the issue of interest. The issue of interest should have been raised before the High Court. Has your client not filed writ petition for recovery of GST along with interest ?

(ii) Govt. (PWD department) is the defaulter. The service supplier must not suffer because of the fault of the recipient of the service. Whether service receiver is Govt. or private firm both are at par in the eyes of GST laws.

(iii) As per Section 2 (84) (k) Central Govt. also falls in the definition of 'person'. Both are 'persons'. Hence Govt. is not above law. There is no separate yardstick for Govt. department.

(iv) To recover interest from Govt. department is a hard nut to crack. It does not mean your client should become dormant or surrender meekly.

(v) In terms of Section 9(1) of CGST it is a statutory responsibility of the service supplier to collect GST from the recipient of the service and deposit with Govt.

(vi) Interest is an integral part of tax. So your client can legally collect /recover interest from Govt. Department.

(vii) Your client should again approach High Court for rectification of the Order for recovery of interest from Govt. department (Service Recipient).

(viii) If you do not fight legally for your right, you are defeated today itself.

There is no other route except High Court for recovery of interest.

Disclaimer : These are my personal views for education purpose only.

[Ganeshan Kalyani]

Interest is linked with delay in depositing the tax. Delay in collecting tax from recipient is not mentioned in law. But 180 days time period for the recipient to make payment to vendor tries to bind the recipient to pay tax along with taxable amount to supplier.

[AMIT BATHAM]

Respected learned colleague, thank you very much for taking out your precious time and sharing your valuable views on the topics.

My client received the GST amount from the government following the honorable high court's order in this regard; however, there is still a portion of the GST amount that is pending with the department. Prior to my hiring as an advocate, another advocate served as his consultant. As soon as he hired me as an advocate, I promptly deposited the tax amount from the credit ledger.

My query is as per sec. 50 (1) Every person who is entitled to pay tax in accordance with the provisions of this Act or the rules issued thereunder, but fails to pay the tax or any portion thereof to the government, What does it signify when someone fails to pay their taxes?

[Shilpi Jain]

To the extent you have paid the liablity from credit balances, no interest should apply.

AI Summary

Interest liability on delayed GST deposits may arise despite recipient non-payment; challenge via due-date and notification arguments. The central operative issue is whether interest liability for delayed GST deposits rests on the supplier despite the government recipient's delayed payment. While administrative and judicial views predominantly treat interest as triggered by delayed deposit irrespective of recipient non-payment, a defense asserts that payment due-dates are tied to return-filing deadlines and that notified filing extensions for the period may negate any delay-based interest. Practical remedies include recovery of interest from the government recipient, seeking order rectification or further litigation, and using credit ledger balances to avoid interest to that extent.