gst act-definition of tax payable

[giri gattupalli]

respected sir,

what is tax payable for the purpose of sec 50 (1) of GST Act. is there any method or formula prescribed in GST or manuals ?. as per my observation there is no definition given for ' tax payable ' in GST Act. please correct if i am wrong please discuss

thanking you

[YAGAY andSUN]

Your observation is substantially correct: the expression "tax payable" is not expressly defined in the Central Goods and Services Tax Act, 2017. However, its meaning is inferable from the scheme of the Act, particularly in the context of Section 50(1).

Section 50(1) provides that every person who is liable to pay tax but fails to pay such tax or any part thereof within the prescribed period shall, for the period for which the tax remains unpaid, pay interest. The controversy has historically centered on whether "tax payable" refers to gross tax liability or net tax liability (i.e., after adjustment of input tax credit (ITC)).

Legislatively, this ambiguity was clarified through the insertion of a proviso to Section 50(1) (retrospectively applied), which stipulates that interest shall be levied only on that portion of tax which is paid by debiting the electronic cash ledger, except in cases involving proceedings under Sections 73 or 74. Thus, "tax payable" for the purpose of interest computation is effectively construed as the net cash liability, not the gross output tax.

No independent "formula" is prescribed in the Act or Rules for computing "tax payable" per se. Instead, the computation is system-driven and derived from:

• Output tax liability (Section 9),

• Set-off through ITC (Sections 16-49),

• Balance discharged in cash.

Accordingly, the working principle may be expressed as:

Tax payable (for Sec. 50(1) interest) = Output tax liability - Eligible ITC utilized

Interest is then computed only on the portion discharged in cash, for the period of delay.

Judicially, this interpretation has been affirmed in decisions such as Refex Industries Ltd. v. Assistant Commissioner of CGST - 2020 (2) TMI 794 - MADRAS HIGH COURT, wherein it was held that interest liability arises only on the net tax liability. This position has also been administratively accepted via CBIC circulars.

In conclusion, while "tax payable" lacks a statutory definition, its meaning under Section 50(1) is now contextually settled as the net tax liability payable in cash, determined after lawful ITC set-off, and not the gross liability shown in returns.

[KASTURI SETHI]

Since the phrase, "Tax Payable" has not been defined in CGST Act, in order to understand the meaning, sense and essence of the phrase, we can resort to other Acts or case laws.

As per judgement of Hon'ble Supreme Court reported as CIT Vs. Vegetable Products Ltd. AIR - 1973 (1) TMI 1 - Supreme Court, "A tax payable is not the same thing as tax assessed. The tax payable is the amount for which a demand notice is issued under Section 15. In determining the tax payable, the tax already paid has to be deducted, Date of decision 29.1.1973"

Source : Supreme Court Words and phrases with Legal Maxims (Third Edition) Compiled by Surindra Malik and Sumeet Malik Publisher : Eastern Book Company, Lucknow

[giri gattupalli]

thank you sir. thank you for your detailed discussion. at this juncture i like to bring to your notice some of my observations .

1. in form GSTR-3B , column 6.1 they used the phrase " total tax payable " "tax paid through ITC " "and tax paid paid through cash.".

they picked up figures from column 3.1 of GSTR-3B that is out ward supplies and out ward tax payable .so they equated total tax payable to tax on outward supplies.so in accordance with their opinion total tax payable is out put tax and rcm. they have picked the phrase tax payable for the purpose of sec 50. i feel there is some inconsistancy in drafting. please discuss.

thanking you

[Pinnacle Tax Advisor]

Tax payable includes tax on outward supplies as well as RCM on inward supplies. If you declared the supplies of the same month in the return to be filed for the said tax period but after due date of return, interest under section 50(1) will be applicable for the net liability i.e. Tax payable minus input available. But if you declared that supplies of any period in the return to be filed for subsequent months, interest will be calculated on complete liability without netting of ITC available.

[Shilpi Jain]

Pls bring out the real issue that you are facing due to this to better answer your query. Generic observation and comments make it difficult to answer.

[giri gattupalli]

good evening madam

issue is simple. department is levying interest for under declaration of out put tax which is discharged by filing Form DRC-03 after six months voluntary ly by debiting electronic credit ledger and where there is always excess ITC available continuously through this delay period. and department is simply levying interest on under declaration (in other words gross tax liability) stating that, for purpose of sec 50(1), tax payable is out put tax payable. (and at this juncture i like to bring to your notice that, in culm 6.3 of GSTR 3B that is total tax payable they captured figures directly from culm 3.1 that is out put tax payable. and thus they equated out put tax liability to tax payable

amendment to sec 50(1) provides interest on net tax liability only when out put tax declared in same tax period. but what about under declaration found after six months and discharged by debting credit ledger before any notice .in my above instant case around 10 laks of interest is demanded, hence this discussion. please discuss in the light of recent judicial rulings.

thanking you

AI Summary

Tax payable under GST interest rules turns on net liability, input credit set-off, and delayed disclosure. The expression 'tax payable' under Section 50(1) of the CGST Act is discussed as an undefined term to be understood from the statutory scheme and return mechanism. The comments note that GSTR-3B reflects total tax payable from outward tax liability, including output tax and reverse charge tax, but the key controversy is whether interest should apply to gross liability or only to the amount unpaid after input tax credit adjustment. The discussion states that, after amendment, interest under Section 50(1) is confined to the net tax liability where tax for the same period is paid late, while later disclosure may attract interest on the full liability.