INTEREST U/S 50 OF CGST ACT SHOULD BE CHARGED ON NET LIABILITY : MADRAS HC

In Writ Petition Nos. 23360 and 23361 of 2019 & VMP Nos. 23106 and 23108 of 2019, Hon’ble Madras HC has held that :

I am supported in my view by a recently inserted proviso to Section
50(1) reading as below :
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 of the said period, shall be levied on that portion of the tax that is paid by debiting the electronic cash ledger.

The above proviso, as per which interest shall be levied only on that
part of the tax which is paid in cash, has been inserted with effect from
01.08.2019, but clearly seeks to correct an anomaly in the provision as it existed prior to such insertion. It should thus, in my view, be read as clarificatory and operative retrospectively.

Learned counsel for the petitioners also draw my attention to the decision of the Telengana High Court in the case of Megha Engineering and
Infrastructures Ltd. V. The Commissioner of Central Tax and others (2019-TIOL-893), where the Division Bench interprets Section 50 as canvassed by the Revenue. The amendment brought to Section 50(1), was only at the stage of press release by the Ministry of Finance at the time when the Division Bench passed its order and the Division Bench thus states that ‘unfortunately, the recommendations of the GST Council are still on paper. Therefore, we cannot interpret Section 50 in the light of the proposed amendment’. Today, however, the amendment stands incorporated into the Statute and comes to the aid of the assessee.

In the light of the above discussion, these Writ Petitions are allowed
and the impugned notices are set aside.
No costs. Connected Miscellaneous
Petitions are closed.