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July 13 To July 19, 2019 u Taxmann’s Corporate Professionals Today u Vol. 45 u 48Comments: High court had rejected a writ
petition on the imposition of interest on
total GST liability including input tax credit
which would have significant implications for
industry. This means that tax authorities can
levy interest on the gross tax liability of an
assessee if there is any delay in tax payment.
This will cause real hardship for the assessee
especially when it has huge liability to pay
and cannot utilize the balance amount in its
electronic credit ledger.
3.2Landmark Lifestyle v. Union of India [2019]
105 taxmann.com 354
The liability to pay interest was imposed on
the assessee on the delayed payment of GST
wherein interest was calculated on the gross
liability without adjusting ITC. The assessee
had paid interest on the actual tax liability.
The assessee filed writ petition before the
Delhi High Court.
The Delhi High Court accepted the contention
of assessee to pay tax on net liability and
ordered that till the next hearing, no forceful
action be imposed on the petitioner for the
recovery of interest amount.
The Delhi High Court granted stay on re-
covery of interest amount on gross GST
liability where there was delay in filing of
GST return. The matter will be listed on 30th
September, 2019.
Comments: High Court had granted stay on
recovery of interest amount on the gross tax
liability. The positive outcome will give a
huge relief to the taxpayers while discharging
their tax liability when there is a delay in
filing of returns.Clarification from CBIC
- The GST Council had recommended fol-
lowing proposals vide Press Release in its
31 st Meeting held on December 22, 2018:-
Amendment to section 50 of the CGST Act to
provide that interest should be charged only
on the net tax liability of the taxpayer, after
taking into account the admissible input tax
credit, i.e. interest would be leviable only on
the amount payable through the electronic
cash ledger.
The above recommendations of the Council
will be made effective only after the necessary
amendments to the GST Acts are carried out.
Comments: Till date no such amendment to
Section 50 has been made. Also, no notifi-
cation, order, circulars have been issued to
clarify this litigated issue of interest payment.
So, the recommendation of the above Press
Release does not hold any legality to provide
taxpayers shield from the payment of interest
on gross tax liability.Conclusion
- The rulings discussed above give soul
basis of calculating amount to be considered
while calculating interest under GST. One
is in favour of revenue while the other is
pending. Though law does not clarify interest
to be levied on gross amount or net amount,
relying only on these judgments would not
give a definitive answer to the taxpayer or
revenue. Hence, some sort of clarification
on this issue from CBIC is required on an
urgent basis. Clarification will reduce the
litigations on this matter to a great extent.
Further, the recommendation given by the
GST council in its 31st meeting to charge
interest on the ‘Net Tax Liability’ seems to
be more logical which will not only reduce
the tax burden but will also cure the real
hardships faced by them. Hence, this rec-
ommendation needs to be executed as soon
as possible either by amending Section 50
of the CGST Act, 2017 or by inserting an
explanation to it.
lll
INTEREST COMPUTATION UNDER GST ON ‘GROSS TAX’ OR ‘NET TAX’