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GST Interest on Net GST Liability only, Effective from 01.09.2020: Controversy & litigation to continue
The long pending issue is finally resolved, though not fully.
Section 50 related to Interest on GST and it mandates the charging of interest on Gross amount instead of net amount.
CBIC has notified Proviso to Section 50(1) of CGST Act, 2017. Now, Interest in GST is to be levied on Net Tax liability w.e.f 01.09.2020 & it is on Gross Liability till 31.08.2020.
Section 50 of CGST Act 2017 was amended by Finance (No. 2) Act, 2019 (23 of 2019) by inserting a proviso to section 50(1) from a date which Government notify in this regard. Now Government has notified that interest will be applicable on net amount w.e.f. 1st day of September, 2020 vide Notification No. 63/2020-Central Tax, dated. 25th August, 2020.
For easy reference, the extract of above provision to Section 50(1) as inserted vide section 100 of Finance (No. 2) Act, 2019 and as notified by CBIC with effect from 1st day of September, 2020 vide Notification No. 63/2020-Central Tax, dated. 25th August, 2020 is as under:
Amendment of section 50
- In section 50 of the Central Goods and Services Tax Act, in sub-section (1), the following proviso shall be inserted, namely:––
“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 ofthe said period, shall be levied on that portion of the tax that is paid by debiting the electronic cash ledger.”
Though, by 39th GST Council meeting, it has provided that Interest for delay in payment of GST to be charged on the net cash tax liability w.e.f. 01.07.2017, the law was not amended. Now, Government has notified the provisions prospectively w.e.f. 01.09.2020 instead of making it applicable w.e.f. 01.07.2017 as per GST 39th Council Meeting.
It may be recalled that Hon’ble Orissa High Court in the case of Prasanna Kumar Bisoi Vs Union of India has already directed GST department to dispose of the representation filed by the petitioner keeping in view the decision taken in the 39th GST Council as expeditiously as possible.
Notification No. 63/2020-Central Tax, dated. 25th August, 2020 reads as follows:-
MINISTRY OF FINANCE
(Department of Revenue)
(Central Board of Indirect Taxes and Customs)
Notification No. 63/2020–Central Tax
Dated: 25th August, 2020
G.S.R. 527(E).—In exercise of the powers conferred by sub-section (2) of section 1 of the Finance (No. 2) Act, 2019 (23 of 2019), the Central Government hereby appoints the 1st day of September, 2020, as the date on which the provisions of section 100 of the Finance (No. 2) Act, 2019 (23 of 2019), shall come into force.
[F. No. 20/06/09/2019-GST]
PRAMOD KUMAR, Director
Though the issue is resolved, the battle appears to be continuing. The above notification is not in line with the promise and declaration done in the 39th GST Council meeting.
Why the issue is not settled as decided & declared earlier. It appears that the court is the only way left for fully resolving the issue with respect to date of Applicability of provisions of Proviso to Section 50(1) of GST Act, 2017.
For ease of reference, the copy of the order of Hon’ble Orissa High Court in the case of Prasanna Kumar Bisoi Vs Union of India is produced as under:
Hon’ble Orissa High Court in
Prasanna Kumar Bisoi Vs Union of India
W.P.(C) NO.13190 OF 2020
Heard learned counsel for the petitioner and Mr.T.K.Satpathy, learned counsel for Central Excise.
- The grievance of the petitioner in this Writ Petition is that he is registered under Central Goods and Service Tax having GSTIN No. 21AJIPB2032N1ZO. He has filed the returns for the financial year 2017-18, 20018-19 and 2019-20 at belated stage and availed Input Tax Credit at the time of filing GSTR-3B returns, as Works Contractor. The Superintendent, Central GST and Central Excise, Berhampur – opposite party No.3 demanded interest under Section 50 (1) of the C.G.S.T Act, 2017 in respect of the above three financial years for Rs.2,24,487/- on 04.03.2020 on the head that demand of interest is payable on ITC set off. Hence the present Writ Petition.
- Learned counsel for the petitioner submitted that in the 39th meeting of GST Council held on 14.03.2020it was decided that interest for delay in payment of GST is to be charged on the Net Cash Tax Liability w.e.f. 01.07.2017 retrospectively but not in the Input Tax Credit. He further submitted that the petitioner has filed a representation before the Superintendent, Central GST and Central Excise, Berhampur – opposite party No.3 on 06.05.2020 under Annexure:3 with a prayer not to charge the interest on the availed Input Tax Credit and to drop the proceeding in view of the decision taken in the 39th meeting of GST Council. However, no action has been taken as yet.
- Considering the above, this Court disposes of this Writ Petition with a direction to the Superintendent, Central GST and Central Excise, Berhampur – opposite party No.3 to dispose of the representation filed by the petitioner on 06.05.2020 under Annexure:3 keeping in view the decision taken in the 39th meeting of GST Council, as expeditiously as possible, preferably within a period of eight weeks from the date of receipt of this order. The decision taken, if any, be communicated to the petitioner.
- As the lock down period is continuing for COVID-19 learned counsel for the petitioner may utilize the soft copy of this order available in the High Court’s website or print thereof at par with the certified copy in the manner prescribed, vide Court’s notice No. 4587, dated 25.03.2020.
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