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GST: CBIC issues administrative instruction for Recovery of Interest on Net Cash liability retrospectively from July 1, 2017 [Read Instructions]

GST - CBIC - administrative instruction - Interest - Net Cash Liability - Taxscan

The Central Board of Indirect Taxes and Customs (CBIC) on Friday has sent the administrative instruction for recovery of interest on net cash liability which will be applicable from July 1, 2017.

The provision of section 50 was amended vide section 100 of the Finance (No. 2) Act, 2019 to provide for charging Interest on the net cash tax liability, which was based on the recommendations of the 35th meeting of the GST Council which came into effect from September 1, 2020.

The GST Council, in its 39th meeting, held on 14th March, 2020 recommended interest to be charged on the net cash tax liability w.e.f. 01.07.2017 and accordingly, recommended the amendment of section 50 of the CGST Act retrospectively w.e.f. July 1, 2017.

The retrospective amendment in the GST laws would be carried out in due course through suitable legislation.

“Post issuance of notification 63/2020- Central Tax dated the 25 August, 2020, there were apprehensions raised by taxpayers that the said notification is issued contrary to the Council’s recommendation to charge interest on net cash liability w.c.f. 01.07.2017. Consequently, a press release, dated 26.08.2020 was issued to clarify the position. Further, in order to implement the decision of the Council in its true spirit, and at the same time working within the present legal framework, it has been decided to address the issue through administrative arrangements,” the Board in the circular said.

Firstly, for the period July 1, 2017 to August 31, 2020 field formations in jurisdiction of the Principal Chief Commissioner or Principal director Generals  may be instructed to recover interest only on the net cash tax liability i.e. that portion of the tax that has been paid by debiting the electronic cash Ledger or is payable through cash ledger.

Secondly, wherever SCNs have been issued on gross tax payable, the same may be kept in the Call Book till the retrospective amendment in section 50 of the CGST Act is carried out.

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