Page 39 - GSTL_21st May 2020_Vol 36_Part 3

2020 ] INTEREST ON DELAYED PAYMENT OF TAX UNDER SECTION 50(1) J65
(iii) The Hon’ble Madras High Court in the case of Retex Industries Ltd.
v. Assistant Commissioner of CGST & Central Excise, vide Writ Peti-
tion Nos. 23360/2019 & 23361/2019 [2020 (34) G.S.T.L. 588 (Mad.)],
wherein held that interest under Section 50(1) of the CGST Act, 2017
is to be levied only on the tax liability that has been paid using the
electronic cash ledger. The relevant extracts of the judgment is re-
produced as under :
“The use of the word ‘delayed’ connotes a situation deprival, where
the State has been deprived of the funds representing tax component
till such time the Return is filed accompanied by the remittance of tax.
The availability of ITC runs counter to this, as it connotes the enrich-
ment of the State, to this extent. Thus, Section 50 which is specifically
intended to apply to a state of deprival cannot apply in a situation
where the State is possessed of sufficient funds to the credit of the as-
sessee. In my considered view, the proper application of Section 50 is
one where interest is levied on a belated cash payment but not on ITC
available all the while with the Department to the credit of the as-
sessee. The latter being available with the Department is, in my view,
neither belated nor delayed.”
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 1-8-2019, 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.
C.B.I. & C. direction on delayed payment of taxes u/s 50(1) of the CGST Act
The C.B.I. & C. issued notice vide F. No. CBEC-20/16/07/2020-GST, dat-
ed February 10, 2020, for recovery of interest payable on delayed payment of tax
by the taxpayers in Form GSTR-3B return belatedly under Section 50(1) of CGST
Act, 2017.
Further, the Principal Additional Director General (Systems), on Febru-
ary 1, 2020, has generated a report and shared the GSTIN wise list of the regis-
tered person, who has not discharged the due interest while filing their Form
GSTR-3B belatedly, which amounts to ` 45,996 crore, remains unpaid to the Gov-
ernment on account of a delayed payment of tax.
Therefore, according to the report, the officers are asked to initiate the
process of recovery of such unpaid interest as per the provisions of Section 79
read with Section 75(12) of the CGST Act, 2017. However, it was further clarified
that the interest liability is required to be paid on the tax liability that is paid be-
latedly either in cash or through Input Tax Credit (ITC) utilization.
Conclusion
Thus, it is high time the Government should clarify about interest paya-
ble on delayed payment of tax and the method of calculation to be adopted by
the taxpayers. There is a huge hue and cry and industry worries regarding C.B.I.
& C.’s recent directive to the field formations to start recovery of interest of
` 45,996 crore of unpaid on account of a delayed payment of tax vide Circular
dated 10-2-2020. Therefore, the C.B.I. & C., in order to create awareness amongst
the taxpayers in a series of tweets, clarified that the Central and several State
Governments have prospectively amended the GST Acts to collect interest on net
tax liability. But the dispute will continue till the issuance of notification by the
Government. This issue is expected to be discussed at the next GST Council
meeting and take final decision in the matter.
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GST LAW TIMES  21st May 2020  39