AMBIGUITY: INTEREST U/s 50(1), CGST ACT 2017
India, being one nation with diverse culture, introduced and implemented the Goods & Service Tax Act, 2017 namely, One Nation One Tax, thereby way of One Act Diverse Views.
Undeniably, this could be scrutinize on the four quadrants, on one of the most recent subject i .e., Interest on Tax Liability under the above mention Act.
Intent of the Government: Interest only on net cash liability
The Honourable Finance Minister in Union Budget 2019-2020 presented on July 5, 2019, had proposed for the amendment in the section 50(1) CGST Act, 2017 to avoid the undue hardship to the Assessees registered under the said Act.
The proviso to be inserted but not yet notified, after sub section (1) of section 50 of the CGST Act, 2017 which is as follows:
“50. (1) Every person who is liable to pay tax in accordance with the provisions of this Act or the rules made thereunder, but fails to pay the tax or any part thereof to the Government within the period prescribed shall for the period for which the tax or any part thereof remains unpaid, pay, on his own, interest at such rate, not exceeding eighteen percent, as may be notified by the Government on the recommendations of the Council:
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 levied on that portion of the tax that is paid by debiting the electronic cash ledger. {NOT YET NOTIFIED}
From the above-mentioned amendment, it is apparent that the government intends to levy the interest under section 50(1) of the CGST Act, 2017 is solely on the component of tax liability which has been paid by cash only.
Contradictory views by the Honourable Courts of India: Interest only on net cash liability / gross tax liability
– The Honourable Telangana High Court in the case of M/s Megha Engineering and Infrastructures Ltd. affirmed the department view and held that interest is payable on gross liability including the credit available with assessee.
– The Honourable Madras High Court in response to the Writ petition Nos. 23360 and 23361 of 2019 & WMP Nos. 23106 and 23108 of 2019 Refex Industries Ltd. vs. Assistant Commissioner of CGST & Central Excise has upheld the fact that interest u/s 50(1) of the CGST Act, 2017 is to be levied only on the tax liability that has been paid using the electronic cash ledger.
– The Honourable Delhi High Court issued the stay order in the case of Landmark Lifestyle Vs Union Of India wherein the court has granted a stay on recovery of interest on gross liability.
– The Honourable Gujarat High Court in the case of Amar Cars Private Limited Vs Union of India has directed the department to not to take any coercive steps for the purpose of recovery of the interest wherein GST department has raised Interest Demand on Gross GST without considering Input Tax Credit .
Chaos for Professionals & Hardship to Assessee:
The applicability of the section mentioned supra is ambiguous not only to the law maker but also to the law enforcer, which cannot be questioned further to the law reckoner and law complier. Therefore, it distinctly seems that the
notices being issued by the Department for the collection of interest on the gross tax amount is the sole intent of harassing the assessee to indirectly boost the collections under the Act.
Inference:
Interest liability to be computed on Net basis , after giving benefit of Input Tax Credit to the Assessee. The amendment introduced for the section mentioned supra is clarificatory and to be applied retrospectively.
Disclaimer – Only views expressed according to the information available till date .
This Article is written by CA BHAVYA SHAH [B.Com, LL.B].
Tags : GST
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