Calculation of Interest on Tax Liability of GST [Clarification Required]

Calculation of Interest on Tax Liability of GST [Clarification Required]

As per Section 50 of Central Goods and Service Tax Act 2017 Interest has to be calculated in case of Late Payment of GST Liability. As per views expressed by GST officers, Interest has be calculated on Gross Tax Liability i.e. without making any Adjustment of GST Credit Available. But GST Council in its 31st Meeting expressed the opinion that GST interest should be calculated on Net Tax Liability after making Adjustment of GST Credit Available.

The implication of both the views have been explained below with the Help of An Example :

As per Telangana HC Judgement Analysis GST Interest will be paid on Gross GST Liability Although GST Council in its 31st Meeting expressed the opinion that GST interest should be calculated on Net Tax Liability after making Adjustment of GST Credit Available but the same was not notified and now this Judgment will obviously prevail over that announcement.

Calculation of Interest on Tax Liability of GST [Clarification Required]

Particulars	CGST	SGST
Gross Tax Liability (in Rs.)	20000	20000
Input Tax Credit Available (in Rs.)	9000	9000
Net Tax Liability (in Rs.)	11000	11000
3B due Date	20-04-2019	20-04-2019
3B Filing Date	30-04-2019	30-04-2019
Number of Days of Delay	10	10
Rate of Interest	18%	18%
Interest calculations as per views expressed by GST officers [on Gross Tax Liability]	Gross Tax Liability*Number of Days of Delay*Rate of Interest/Total Number of Days in a Financial Year	Gross Tax Liability*Number of Days of Delay*Rate of Interest/Total Number of Days in a Financial Year
Interest Payable (In Rs.)	99	99
Interest calculations as per views expressed by GST Council [on Net Tax Liability]	Net Tax Liability*Number of Days of Delay*Rate of Interest/Total Number of Days in a Financial Year	Net Tax Liability*Number of Days of Delay*Rate of Interest/Total Number of Days in a Financial Year
Interest Payable (In Rs.)	54	54

It is important to Note that as per section 50 of CGST Act interest has to be calculated on GST Liability in prescribed manner. But Nothing has been prescribed as of now. Naturally as per taxpayers view the interest should be calculated on Net Tax Liability and as per GST Department's view it should be calculated on Gross Tax Liability. This makes manner for calculation of GST interest a highly debatable issue.

Pending Amendment : Although the Issue was raised in the GST Council, but the amendment for the same is still pending. Also as per authors opinion the amendment would be clarificatory in nature and hence should be retrospective.

Disclaimer: The entire contents of this document have been prepared on the basis of relevant provisions and as per the information existing at the time of the preparation. Although care has been taken to ensure the accuracy, completeness and reliability of the information provided, I assume no responsibility therefore. Users of this information are expected to refer to the relevant existing provisions of applicable Laws. The user of the information agrees that the information is not a professional advice and is subject to change without notice. I assume no responsibility for the consequences of use of such information. In no event shall I shall be liable for any direct, indirect, special or incidental damage resulting from, arising out of or in connection with the use of the information