Page 38 - GSTL_21st May 2020_Vol 36_Part 3

J64 GST LAW TIMES [ Vol. 36
CGST Act, 2017 and inserted proviso to the said section, which provided for the
charging of interest only on the “net cash liability” to avoid the undue hardship
to the fellow assessee registered under GST regime. The relevant portion of the
inserted proviso to Section 50(1) of the CGST Act, is reproduced as under :
“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.”
On plain reading of the cited inserted provision clearly implies that the Govern-
ment’s intention is to charge interest only on the amount of tax liability paid by
cash only not the amount of tax adjusted against input tax credit.
But the cited proviso of Section 50(1) of the CGST Act, so far has not been
notified by the Government till date by which field formations are issuing show
cause notices for collecting total interest on total tax liability in case of defaulter
of payment of tax dues. In absence of the Government notification for the said
amendment of Section 50(1), the taxpayers are taking route of writ petition before
the various High Courts to get relief of interest liability.
Case Laws
(i) The Hon’ble Telangana High Court in the case of Megha Engineering
and Infrastructures Ltd. v. Commissioner of Central Tax, reported in
2019-TIOL-893, where the Division Bench interprets 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 Sec-
tion 50 in the light of the proposed amendment’. Today, however,
the amendment stands incorporated into the Statute and comes to
the aid of assessee.
Accordingly, the ground on which Telangana High Court held that
interest under Section 50(1) of the CGST Act, 2017 is to be levied on
the gross liability of tax doesn’t stands good after the inclusion of
proviso after sub-section (1) of Section 50 of the CGST Act, 2017.
(ii) The Hon’ble High Court of Delhi in the case of M/s. Landmark Life-
style v. Union Bank of India - (2019) 105 taxmann.com 354 (Delhi) and
others has granted stay on recovery of interest amount on gross
GST Liability where there was delay in filing of GST Return.
Relevant extracts of the judgment is as below :
“Section 50 of the Central Goods and Services Tax Act, 2017/Section
50 of the Delhi Goods and Services Tax Act, 2017 - Payment of tax -
Interest on delayed payment - Whether where petitioner-assessee
contended that calculation of interest payable for delayed payment of
GST as determined by revenue was erroneous as same had been cal-
culated even on amount constituting input tax credit which is in fact
to be adjusted against tax liability, no coercive action was to be taken
against petitioner for non-payment of interest amount till next date of
hearing – Held, yes [Para 4]”
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