Interest on net tax liability –Section 50 amendment notified prospectively

by | Aug 28, 2020 | Insight

We apprised you on our take on levy of interest on delayed payment of GST on gross vs. net liability. This email intends to update you on latest developments on the issue.

Brief Background

  • Section 50 of the Central Goods & Services Tax Act, 2017 (‘CGST Act’) levies interest on late payment of tax.

 

  • In 31st GST Council Meeting on December 22, 2018, it was decided to amend Section 50 and impose interest on net tax liability (i.e. liability payable through Electronic Cash Ledger). The amendment was decided to be prospective in nature. Consequently, the CGST Act was amended vide the Finance Act, 2019. The amendment was not notified till now.

 

  • In 39th GST Council Meeting on March 14, 2020, it was again proposed to give this amendment a retrospective effect from July 1, 2017. Similar view was taken by Telangana High Court in the case of Refex Industries Limited v. ACCGST, 2020-VIL-71-MAD wherein it was held that proviso to Section 50(1) is curative in nature and needs to be given retrospective effect.

Latest Developments

  • The Central Government has now issued Notification No. 63/2020-Central Tax dated August 25, 2020, notifying amendment in Section 50(1) of the CGST Act. The amendment is applicable prospectively from September 1, 2020.

 

  • CBIC has released Press Release dated August 26, 2020 that the amendment is made prospective due to technical limitations. The Press Release clarifies that the authorities should not make any recoveries for past period based on gross liability.
  •  

NITYA Comments: The amendment has been given prospective effect since the Finance Act, 2019 enacted before 39th GST Council meeting, did not propose retrospective amendment. A Notification cannot give retrospective effect to Section 50. Hence, the Government need to make another amendment vide Amendment Act / Finance Act to make this change effective retrospectively. The Press Release has brought a welcome relief and the authorities are likely to refrain from demanding interest on gross basis for past period.

Hope you find this an interesting read. Please feel free to share your comments / feedback on the same.

For instant updates, visit our Twitter handle at https://twitter.com/tax_nitya

0 Comments

Archives

error: