Interest Payable on Gross GST Liability, as Declared in GSTR-3B: CBIC

Interest on GST Delayed Payments

Taxpayers are liable to pay interest on delay in the deposition of GST liability, as declared in GSTR-3B. Section 50 of the Central Goods and Service Tax Act, 2017 contains interest related provisions.

However, whether interest is payable on the gross amount of GST liability or net amount of GST liability (i.e., after setting off ITC Balance) is still under dispute.

On 10th February 2020, the CBIC (Central Board of Indirect Taxes and Custom) issued a notice (F. No. CBEC-20/16/07/2020- GST) regarding the amount of payable interest on Delayed Tax. 

The CBIC has declared that the taxpayers, who have filed returns through GSTR-3B Form, will have to pay interest. The interest payable is upon the total tax liability amount as mentioned in the GSTR-3B which has been paid belatedly whether by cash or by utilization of Input Tax Credit. 

1. Interest on Delayed GST: The Current Situation

On 1st February 2020, the Principal Additional Director General of Systems has shared a list. The list features the taxpayers who haven’t paid the interest due amount at the time of filing the GSTR-3B returns. GSTN has prepared the list according to GSTIN numbers of the identified taxpayers. As per the report, GSTN has observed that the interest amounting to Rs. 45,996/- crores (Forty-five thousand nine hundred and ninety-six crores) remains unpaid to the Government. The Principal Additional Director General of Systems has shared this report on the SFTP portal. On sharing this his aim was to initiate the process of recovery in the shortest.

2. Why did the CBIC Release Such Notice?

The CBIC has rolled out this notice after confusion raised by the field formations. The confusion was whether the amount of payable interest depends on the net cash liability or on the amount of gross tax liability. 

On a similar matter, Hon’ble High Court of Telangana has passed precedent in the matter of Megha Engineering and infrastructure limited, 2019-VIL-175-TEL. The High Court has clarified that the gross amount should be considered for computation of interest on delayed GST, not net amount.

Therefore, to end ambiguity on this matter, CBIC has clarified that Section 50 (1) of the CGST Act (Central Goods and Service Tax) is quite clear. Hence, the amount of interest payable is where the taxpayer has delayed tax. And the person requires to calculate the amount of gross tax liability.

3. Interest on Delayed GST: Clarification Through Twitter

Since the inception of GST, apart from notifications and circulars, the department is also using Twitter as a mode to share information with taxpayers and also providing clarification on various issues from time to time. CBIC has shared the information on their official pages.

In the matter of ambiguity around the payment of interest on gross or net liability, CBIC has provided clarification through tweets. Wherein it clearly provided that interest is payable on the gross amount of GST liability.

Interest on Gross Tax Liabilites under GST

4. EndNote

The CBIC has sought personal attention from all the Principal Chief Commissioners. The Chief Commissioners of Central Tax need to scrutinize the issue. Furthermore, the field formations need to act accordingly to recover the applicable interest the identified taxpayers have not paid in their jurisdiction. The board has asked for weekly reports on GSTIN wise recovery of the interest on delayed GST filings.

Read More: Taxpayers Are Allowed to File GSTR-3B Returns in a Staggered Manner

DISCLAIMER: The views expressed are strictly of the author and VJM & Associates LLP. The contents of this article are solely for informational purpose. It does not constitute professional advice or recommendation of firm. Neither the author nor firm and its affiliates accepts any liabilities for any loss or damage of any kind arising out of any information in this article nor for any actions taken in reliance thereon.

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