liability of interest under gst act-2017

[giri gattupalli]

respected sir,

in recent judgement in

ARYA COTTON INDUSTRIES & ANR. Versus UNION OF INDIA & ANR. - 2024 (7) TMI 239 - GUJARAT HIGH COURT honourable Gujarat high court taken the view that, interest under sec 50 should be levied after considering the date of cash deposited and available in cash ledger only. even FORM-DRC-03 filed in later date. and considered the date of deposit of cash into cash ledger is the date of discharge of GST liability in other words, (considering filing of FORM DRC-03 is as just book adjustment) interest will not be leviable to the extent of cash available in cash ledger. Even FORM-DRC-03 filed in later date.

In GST ACT input tax credit or ITC laying in electronic credit ledger is equal to cash laying in cash ledger then, same logic should apply to electronic credit ledger also. in my opinion in any instance of levy of interest under sec 50, interest should be calculated after deducting amount available in cash ledger and credit ledger also.

I request all honourable members to discuss.

[Sadanand Bulbule]

As per Arya Cotton Industries - 2024 (7) TMI 239 - GUJARAT HIGH COURT (Guj. HC), interest under Sec. 50 is chargeable only till the date cash is deposited in the Electronic Cash Ledger — later filing of DRC-03 is only a book entry.

Applying the same logic, ITC in the Electronic Credit Ledger is equivalent to cash, since it represents tax already paid to the government. Hence, no interest should be levied on the portion of liability covered by available ITC or cash balance.  

Interest under Section 50 = only on the unpaid portion (after deducting both cash & credit balances).

[giri gattupalli]

respected sir,

i request all panel members to share their inputs.in my opinion, as per Arya Cotton Industries (Guj. HC), if ITC or CASH already available in respective ledgers or in other words DEPOSITING WITH GOVT, AND AFTER MAKING FUNDS AVAILABLE TO EX-CHEQUER FOR UTILISATION, if requirement of filing of FORM DRC-03 is just a book entry. and doesn’t have much significance, computation of interest under SEC 50 (FOR PURPOSE OF ALL THREE SUB SECTIONS) should be made after deducting the cash and credit available with department only.

and i always felt that, levy of interest under GST ACT -2017 on GROSS TAX LIABLILITY is against the very nature of interest that is LEVY OF INTEREST IS COMPENSATIVE IN NATURE. as there is no deprivation of funds for govt, levy of interest is not warranted.

please take forward discussion and educate me

[Shilpi Jain]

You are right . Interest is compensatory in nature as held by many Courts including SC. It should be charged on the unpaid balances only i.e. after deducting the credit and the cash balances.

[Padmanathan KV]

Essence of this is captured in Rule 88B, isnt it?

[giri gattupalli]

respected sir,

please post your valid opinions about levy of interest . why because levy of interest in gst become heavy burden as the authorities are imposing  interest on gross liablity.

thank you

AI Summary

Debating GST interest u/s 50: cash ledger, ITC balance, and whether interest applies on gross liability Participants discuss interest liability under Section 50 of the GST Act, 2017, in light of a Gujarat High Court ruling in Arya Cotton Industries. The court held that interest is chargeable only until the date tax is deposited in the electronic cash ledger, treating later filing of FORM DRC-03 as a mere book entry. Forum members argue that input tax credit in the electronic credit ledger is equivalent to cash already with the government, so interest should apply only on the unpaid portion after deducting both cash and credit balances. They emphasize that interest is compensatory in nature, not penal, and criticize departmental practice of charging interest on gross tax liability as an undue burden.