CBIC CLARIFIES THAT NO RECOVERY OF INTEREST ON DELAYED GST PAYMENT EVEN FOR PAST PERIOD

CBIC CLARIFIES THAT NO RECOVERY OF INTEREST ON DELAYED GST PAYMENT EVEN FOR PAST PERIOD

The department clarified that due to certain technical limitations, the notification has been issued prospectively.

The explanation came after receiving a mixed comment on the social media related to the notifications issued on 25th August 2020 regarding collecting of interest on the delayed GST payment on net tax liability with effect from 01st September 2020. 


On Wednesday 26th August 2020, the Central Board of Indirect Taxes & Customs (CBIC) issued a clarification on the notification no. 63/2020-Central Tax dated 25th August 2020 regarding interest on delayed GST payment. 
 

The department gave an assurance that it will not recover any interest on delayed GST payment even for the past period as well by the Central and State tax administration as per the decision taken in the 39th Meeting of the GST Council. This step of the government has given much-needed relief to the taxpayers.


The CBIC notified that the interest will only be calculated and charged on net cash tax liability for delayed GST payments that too after the deduction of the available input tax credits. These modifications will come into effect from 1st September 2020.

The notification dated 25th August 2020, stated that: - 
 

“In exercise of the powers conferred by sub-section (2) of section 1 of the Finance (No. 2) Act, 2019 (23 of 2019), the Central Government hereby appoints the 1st day of September 2020, as the date on which the provisions of section 100 of the Finance (No. 2) Act, 2019 (23 of 2019), shall come into force,”


It was decided in the 39th GST Council meeting, that the interest on delayed GST payments will be applicable only on the net cash tax liability that will arise after the deduction of the available input tax credits. The interest on a delayed GST payment will no longer be charged depends on the gross tax liability.

This change will come into force retrospectively with effect from 1st July 2017. GST legislation came into force on the 01st of July, 2017. Nevertheless, as per the latest notification, interest will be charged on Net Cash Tax liability with effect from 1st September 2020 for delayed GST payment. 

The taxpayers have got the much-needed relief from this retrospective amendment in the law. 

The Finance Minister of India also stated in the meeting that the government is looking to introduce some appropriate amendments to incorporate the suggested recommendations. In the year 2019, Section 50 of the CGST Act has been amended by the government to provide clarification that the interest will be levied on a net basis.

But the amendment had no explanation whether the move would be made on a prospective or retrospective basis.  That confusion has now been cleared by the government with this latest notification.

The decision of imposing the interest liability retrospectively on a net basis has provided a big sigh of relief to the taxpayers with substantial input tax credits. Such a decision also helps in boosting the taxpayer’s confidence. 
 

Edited by Minu Mishra

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