Controversy surrounding interest on delayed payment of tax under goods and services tax act July 8, 2020
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“Justice delayed is Justice denied” and quiet aptly, it applies to the controversy revolving around the amount on which interest is to be levied for delayed payment of tax under the Central Goods and Services Tax Act, 2017 (the ‘CGST Act’). Goods and Services Tax (‘GST’) was introduced with the intention of ease of doing business. However, within its life of three years, businesses have had to face unfathomable situations. One of the contentious issues under GST is whether interest on delayed payment of tax is required to be paid on gross or net tax liability?
In the erstwhile regime, interest was payable on the amount of tax after adjustment of the Input Tax Credit (‘ITC’), howbeit in the present regime the confusion arises due to segregation of ‘Electronic Cash Ledger’ and ‘Electronic Credit Ledger’. At the time of inception of GST, Section 50 of the CGST Act provided for leviability of interest on delay in payment of tax but, failed to provide the amount on which interest was to be calculated i.e. whether interest would be payable even on the tax liability that maybe set offset with accumulated ITC. To the dismay of taxpayers, the tax authorities took benefit of this loophole and issued notices demanding huge amount of interest on the gross liability. Against such demands, various representations were filed seeking clarification on the issue.
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