Interest under Section 50 of CGST Act

[Kishor Deshpande]

One of my client filed his GSTR-1 for the month of August 2021 within due date showing tax liability.  There were on tax credit to be claimed for the said tax period and he paid entire tax by cash. However, in GSTR 3B filed for the said period, tax liability was shown as zero and the balance remained in cash ledger. Then after, the said cash balance was not utilized for the payment of tax in any tax period. After that we received notice in ASMT 10. So, on receipt of ASMT 10, DRC 03 was filed. The question is that since cash balance was not utilized till filing DRC 03, dealer is liable to pay interest upto filing of DRC 03 ?

[KASTURI SETHI]

Interest is payable as per Section 50(1) of CGST Act. There is no escape route, You are required to pay interest on your own without issuance of SCN. 

[Kishor Deshpande]

Thank u sir

[Shilpi Jain]

No interest in case amount was deposited in electronic cash ledger within time - Eicher Motors Limited - 2024 (1) TMI 1111 - MADRAS HIGH COURT

Refer to this Mad HC decision.

[Kishor Deshpande]

Thank u Shilpiji

[Shilpi Jain]

Also refer to this proviso in rule 88B which in my view is applicable retrospectively

Provided that where any amount has been credited in the Electronic Cash Ledger as per provisions of sub-section  (1) of section 49 on or before the due date of filing the said return, but is debited from the said ledger for payment of tax while filing the said return after the due date, the said amount shall not be taken into consideration while calculating such interest if the said amount is lying in the said ledger from the due date till the date of its debit at the time of filing return

[Kishor Deshpande]

Thank u Shilpiji

[Sadanand Bulbule]

Strictly speaking interest is laible to be paid because tax was not "paid" until it was set off in DRC-03, even if the cash was available in the ledger.

[Kishor Deshpande]

Thank u sir

[KASTURI SETHI]

2024 (5) TMI 264 - PATNA HIGH COURT SINCON INFRASTRUCTURE PVT. LTD. Versus UNION OF INDIA

 

[Kishor Deshpande]

Thank u sir

[Sadanand Bulbule]

I welcome the suabstantiated replies offered by Sirji. No more doubts. 

AI Summary

Interest under Section 50 CGST may be payable where tax remains unpaid despite electronic ledger credit; exceptions may apply.
Interest under Section 50 of the CGST Act is payable while tax remains unpaid, but amounts credited to the electronic cash ledger on or before the return due date and remaining there until debit may be excluded from interest under the proviso to Rule 88B. A contrary judicial view treats tax as unpaid until formally set off (for example by DRC adjustment), so interest would continue until such setoff is effected. Maintain ledger timing evidence to invoke the Rule 88B proviso.