Sec 50(1) of CGST Act 2017
Every person is liable to pay tax as per provisions of Time of Supply. If a person does not pay taxes on time, then he is liable to pay interest for delayed payment. The section 50 of CGST Act deals with the same. The provision is silent for the manner of calculation of interest which created confusion among assesses.
BRIEF TIMELINE
- 22nd December 2018 – The GST council
Proposed for amendment of Section 50 of CGST Act, 2017 to allow payment of interest on net cash liability.
- 04th February 2019 – The Principal Commissioner
(Hyderabad) issued a Standing Order 01/2019 to clarify that interest is payable on gross liability, including on the portion of the liability that was adjusted using the accumulated ITC.
- 18th April, 2019 – The Hon’ble High Court
Of Telangana held that interest is payable on gross liability wherein the High Court observed that since the ownership of such money is with the registered person till the time of actual payment, the Government is entitled for earning interest on gross amount.
- 1st August, 2019 – Finance (No.2) Act, 2019
Introduced proviso to section 50(1) of the CGST Act, 2017 which substantiated that interest shall be levied on that portion of the tax that is paid by debiting the electronic cash ledger which means interest is payable on net liability. However, it was not made effective and even it didn’t clarify whether the change would apply on a prospective or retrospective.
- 6th January, 2020 – Madras High Court
Held that levy of interest on delayed payment of GST is purely compensatory. Accordingly, interest is liable to be charged on the net cash payment and not on the gross liability.
- 1st February, 2020 – The Finance Minister
In her budget speech of 2020 has acknowledged that the harassment of tax payer will not be tolerated, and assured that tax payer won’t be harassed to pay interest on gross liability.
- 14th March, 2020 – 39th GST Council Meeting
It was decided that,interest for delay in payment of GST would be charged on the net cash tax liability w.e.f. 01st July, 2017.
After series of litigation, judgments, tweets, interpretations and amendments under the erstwhile law it was settled that liability for payment on interest shall arise on net liability. However, the proposed amendment is still not effective.
Written by: CA Abhinav Sharma
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