Interest to be paid on net GST with effect from September 1

Mumbai: The industry had earlier this year raised concern over the directive of recovery of about Rs 46,000 crore of unpaid interest on delayed GST payment. The interest was charged on gross tax liability.

The GST Council, comprising centre and state finance ministers, in its 39th meeting in March had decided that interest for delay in payment of GST to be charged on net tax liability with effect from July 1, 2017, and law would be amended retrospectively. However, the Central Board of Indirect Taxes and Customs (CBIC) on August 25, notified September 1, 2020, as the date from which interest would be charged on net tax liability.

AMRG & Associates Senior Partner Rajat Mohan said this notification seems to be in disconnect with decisions of GST Council wherein it was assured to the taxpayers that the said benefit would be available retrospectively from July 1, 2017. “Prospective availability of this benefit would mean that millions of taxpayers may be looking at demand of interest for over 3 years from the date of GST implementation. Businesses are expected to approach the High Courts again on this unjustified and illegal demand of interest basis the ‘principle of estoppel’,” Mohan said.

The CBIC had earlier said that GST law permits interest calculation on delayed GST payment on the basis of gross tax liability. This position has been upheld in the Telangana High Court’s decision dated April 18, 2019. Net GST liability is arrived at after deducting input tax credit from gross GST liability.

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