GST Council gave a long pending relief to the Taxpayers vide Notification no. 63/2020 CT dated 25.08.2020 regarding interest payment pertaining to Goods and Service Tax. The effect of the notification is that now the interest would be applicable only on the portion that is discharged by way of Cash ledger. No interest would be payable on the part of the tax which is discharged through Electronic Credit Ledger.
Section 50 of CGST Act deals with the interest on delayed payment of tax. As per Section 50, if the taxpayer fails to pay tax to the government within the specified time period, he shall be required to pay interest on such tax for the period during which it has remained unpaid. Therefore, any amount of tax whose payment is delayed; interest becomes payable on it for delayed period. Before the Notification No. 63/2020 CT, there was no such distinguish as how the tax is paid whether adjusted from amount already lying in the Electronic credit ledger or it is paid from the pocket of the taxpayer. It was payable on the whole portion.
Whereas after 01.09.2020 which is the effective date of this notification No. 63/2020 CT, interest would be charged on the net tax liability of the taxpayer that is the tax which is paid through Electronic Cash Ledger. Here net tax liability of the taxpayers means that if the unpaid or delayed tax is Rs. 100/- but some portion say Rs. 40/- is paid through adjustment from Electronic Credit Ledger and the balance Rs. 60 is paid through Electronic Cash ledger, then Rs. 60/- is the net tax liability and would attract interest as per proviso to Sec 50.
The demand for amending Section 50 of CGST Act was since long. Finance Minister has announced in the 39th meeting of GST Council that this relief would be given retrospectively from very first day of implementation of GST i.e. 01.07.2017 but the notification made the amendment effective from 01.09.2020. Though CBIC has clarified through a press release dated 26.08.2020 that due to some technical issue notification was issued without retrospectively effect. But it has assured through the press release that no recoveries shall be made for the past period by the tax authorities.
CBIC explanation came in wake of lots of comments and criticism that this notification drew on social media due to the fact that amendment was brought surprisingly without retrospective effect against what was promised by the 39th GST Council meeting held on 14.03.20. Therefore, CBIC had to clarify that department doesn’t intend to make recoveries on account of previous periods. Notification to this effect is also expected soon.
CMA Amit Kumar
