Applicability of Amended Rule 88B

[POOJA AGARWAL]

Dear Experts

Rule 88B has been amended to provide that no interest shall be payable on the amount available in Electronic Cash Ledger, merely for delay in filing GSTR-3B. However, the department in our case is insisting that the same shall be effective w.e.f. 10.07.2024; and demanding interest for the period 2017-18 to 2021-22.

Please suggest

[Rajagopalan Ranganathan]

Madam,

Rule 88B was inserted by the Central Goods and Services Tax (Amendment) Rules, 2022, w.e.f. 1-7-2017.  Hence it is applicable from 1.7.2017. The contention of the Department is not tenable for the period 2017-18 to 2021-22.

[KASTURI SETHI]

Sh. Ranganathan Sir,

Pl. check serial no. 15 of Notification No. 12/24-CT dated 10.07.24 which inserts Rule 88 B. No specific effective date has been mentioned for Rule 88B.

“(2) Save as otherwise provided in these rules, they shall come into force on the date of their publication in the Official Gazette."

Is it not covered under, "shall come into force on the date of their publication in the Official Gazette." ? and that is 10.07.24.

[Sadanand Bulbule]

Dear all

I wish to remind that, to ease the interest burden of the taxpayers, 53rd GST Council meeting recommends not to levy interest under Section 50 of CGST Act in case of delayed filing of return, on the amount which is available in Electronic Cash Ledger (ECL) on the due date of filing of the said return.

[Sadanand Bulbule]

Dear all 

Kindly peruse the following:

Amendment of section 50.

112. In section 50 of the Central Goods and Services Tax Act, in sub-section (1), for the proviso, the following proviso shall be substituted and shall be deemed to have been substituted with effect from the 1st day of July, 2017, namely:––

“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.”.

[Sadanand Bulbule]

Substituted proviso to Section 50 by the Finance Act, 2024.

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 or section 74A in respect of the said period, shall be payable on that portion of the tax which is paid by debiting the electronic cash ledger.

[Sadanand Bulbule]

However vide NOTIFICATION NO.16/2021 dated 1st June, 2021, the Central Government appointed the 1st day of June, 2021, as the date on which the provisions of section 112 of the said Act to into force. [Sl No. 4 above].

[KASTURI SETHI]

Sh.Sadanand Bulbule Ji,

Sir, The issue is what is the effective date of amendment of Rule 88B. After the amendment, if the amount of GST is deposited in Electronic Cash Ledger, that is to be treated as deposited into Govt. account and the 'meter' of interest will stop clicking. as soon as the amount of tax is deposited in Electronic Cash Ledger. Earlier the 'meter' of interest would stop clicking after only after setting off liability. Now the meter stops clicking with deposit of GST in Electronic Cash.

So I am of the view that the department is correct. Please oblige me by clearing the air on the issue.

Thanks & regards.

[POOJA AGARWAL]

Respected Kasturi Sir,

As per my view this Rule 88B was amended after the decisions of Hon'ble High Courts in of M/s Vishnu Aroma Pouching Pvt Ltd Vs. Union Of India in 2020 (4) TMI 56 - GUJARAT HIGH COURT and ARYA COTTON INDUSTRIES & ANR. VERSUS UNION OF INDIA & ANR reported in 2024 (7) TMI 239. 

The gist of the discussion was when the amount is deposited in electronic cash ledger, the same is credited to government account and money is not available with the assesee. Also some RTI was filed; wherein it was clarified that the GST collection data declared by the government is included in GST Collection figures.

So can't we say that the amendment was made in line with the judicial pronouncements; hence clarificatory in nature, and clarificatory amendments are retrospective.  

[Sadanand Bulbule]

Dear all

With due respect to all experts, in my humble opinion the subject provision is expressly effective from 01/07/2017.The concerned authority needs to be properly convinced with the facts and settled law in terms of the judgement cited by Pooja Madam. Hope the authority would also appreciate the object of said provision with right perception. Otherwise the "theory of discrimination" would come into play which the superior courts will negate.

[KASTURI SETHI]

Madam Pooja Agarwal,

With reference to your views at serial no.8 dated 02.9.2024, in my view, the situation calls for issuance of clarification by the Board to the effect that the subject amendment is clarificatory in nature and hence applicable retrospectively w.e.f. 1.7.17.

My views should be read with my above views at serial nos. 2 & 7 .and contrary views, if any, are welcome with full respect to all experts.

Disclaimer : These are my personal views and are meant for academic purpose and not for any court proceedings.

[POOJA AGARWAL]

Thanks a lot experts for the prompt guidance.

[Shilpi Jain]

This should be applicable from 1.7.17 since amount paid in cash ledger is as good as tax paid. So interest should not apply

[Niilesh Zaveri]

Payment is said to be made when the funds are debited in the bank account of the registered person and credited to the Electronic Cash Ledger. Subsequent reducing the same amount from cash ledger while filing GSTR-3B is mere appropriation of money paid towards tax earlier. For example if the tax was paid by debit to OD/CC account of the registered person then bank would start charging interest from the date on which some amount is paid by debit to such OD/CC account. 

Further, interest is compensatory in nature and is payable when the amount is not paid on due date, from the due date till actual date of payment - SC Pratibha Processors.

Proviso inserted from 10.07.2024 is clarificatory in nature as it merely clarifies the intent of the legislature that if the money was paid earlier by the taxpayer before the due date of filing of GSTR-3B, then even though it lies in Electronic Cash Ledger till GSTR-3B is actually filed no interest can be levied and collected from such taxpayer as for late filing of GSTR-3B there is already a late fees charged to the taxpayer.   

AI Summary

Interest exemption for electronic cash ledger deposits prevents interest on late GST returns when tax was deposited earlier.
Dispute concerns whether the amendment to Rule 88B-which exempts amounts in the Electronic Cash Ledger from interest merely for delayed return filing-applies retrospectively from 1 July 2017 or only from the rule's publication date in July 2024. Resolution requires reconciling the Finance Act substitution to the proviso of Section 50 (deemed effective 1 July 2017), notifications appointing commencement dates for related provisions, GST Council recommendations to relieve interest where ledger funds existed, and judicial findings treating ledger deposits as government receipts.