Delay in GST Payment: Interest to be charged on net GST liability with retrospective effect

Delay in GST Payment: Interest to be charged on net GST liability with retrospective effect

The government by proposing the amendment in GST Law vide Finance Bill 2021 has clarified that the interest on net tax liability with retrospective effect will get legal backing.

Clause 103 of the bill seeks to amend section 50 of the CSGT act to substitute proviso to sub section(1) with retrospective effect from 1st july, 2017.

Now, the interest has to be paid on net tax liability provided the person has not been issued any show cause notice under section 73 or section 74.

 The Net GST liability can be calculated after deducting input tax credit from gross GST liability. Tax is deposited along with returns within the prescribed timeline. After the prescribed date, the assessee is to pay interest on tax liability.

The taxpayers to avoid any litigation must file the return on time and even if there is some delay they must pay tax along with interest on net tax liability so as to avoid any litigation. If there is any issue of SCN under section 73 or 74, then this provision will not apply and the taxpayer has to pay tax on gross tax liability.

However, a notification was issued on August 25, 2020, which set the appointed date as September 1, 2020 for interest applicability.

It was alleged by the taxpayers that this notification was contrary to recommendations given by the Council. In order to address this issue, the Central Board of Indirect Taxes and Customs (CBIC) issued an instruction on September 18.

Therefore, it was decided that for the period July 1 to August 31, 2020, interest is to be recovered only on the net cash tax liability (that it, that portion of the tax that has been paid by debiting the electronic cash ledger or payable through cash ledger).

The CBIC further added, wherever show-cause notice has been issued on gross tax payable, the same may be kept in Call Book till the respective amendment in Section 50 of the CGST Act is carried out.

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