The Union Budget 2019 has provided relief to GST-registered taxpayers with several new updates. One such amendment relates to the interest on the delayed payment of GST liability. This is a big relief for taxpayers, because, until this amendment was passed, interest has always been charged on the entire amount of tax paid after the due date.

The 31st GST Council meeting recommended changing this Law to provide that only the net liability of a taxpayer would hereafter be subjected to interest. This amendment to the Central Goods and Services Tax Act, was presented under the Finance Bill, 2019. Under this new amendment governing section 50 of the Act, interest will now be charged on only that portion of the GST liability which is paid by debiting the electronic cash ledger. In other words, the portion paid using cash, bringing much desired relief to taxpayers.

To understand this amendment in simpler terms, let us look at two illustrations of taxpayers making belated payments under GST, both before and after the update:

In the examples above, we can see how this amendment will bring about a reduced interest liability for taxpayers, and a nil liability in cases where only input tax credit has been used. This will greatly benefit taxpayers who will no longer have to bear the burden of interest to the extent of liability set off from ITC.

The amendment to section 50 was proposed in the Union Budget on the July 5, 2019, and the Finance Bill 2019 was passed in the Lok Sabha on the July 18, 2019. For taxpayers who have already paid interest on the full tax liability in the current financial year, including that portion paid using credit, the official notification, once released, will provide clarity on whether they are eligible for a refund. 

Source : Economic Times

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