We all know the suggestion made by the GST Council in its 31st Council Meeting for amendment in Section 50 of the CGST Act, 2017 which is as under :

“Amendment of section 50 of the CGST Act to provide that interest should be charged only on the net tax liability of the taxpayer, after taking into account the admissible input tax credit, i.e. interest would be leviable only on the amount payable through the electronic cash ledger.”

It clearly says that while computing interest under Section 50 of the CGST Act, 2017 ; such interest should be computed on NET TAX LIABILITY (i.e. Output tax – Input Tax Credit)

BUT as per the letter sent by Special Secretary & Member Sh. A.K. Pandey to all Principal Chief Commissioners/ Chief Commissioners on 10.02.2020, he said that the interest under section 50 of the CGST Act, 2017 shall be computed on GROSS TAX LIABILITY ; which is as under :

“Doubts have been raised by the field formations, whether the interest has to be paid on the Gross Tax Liability or on the NET CASH LIABILITY. In this regard, the provisions of Section 50 are very clear that interest liability is required to be paid on the tax liability that is paid belatedly, either through cash or through utilization of Input Tax Credit (ITC.). In other words, interest is required to be paid on total amount of tax liability as shown in FORM GSTR-3B.” They have also said for proper recovery of this interest from taxpayers who have filed their GSTR-3B returns belatedly.

It says that while computing interest under section 50 of the CGST Act, 2017; the taxpayer can not reduce Input Tax Credit from the Output Tax payable by them.

This has created the biggest controversy between the GST Council and the Special Secretary about treatment of Section 50 of the CGST Act, 2017.

On this controversy, professional advocates have filed writ petition against this decision in Gujarat High Court. HC has stayed this new process initiated by the GST department and has issued the notice to respondents. We hope that govt. will drop this procedure and will allow taxpayers to compute interest on NET TAX LIABILITY.

Article By : Tax Concept Team