Interest Payable on Late Payment of GST on net cash tax liability: Big Relief by Union Budget 2019

Budget 2019 has proposed Provision for charging interest only on the net cash tax liability

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.

This matter was controversial specially after Telangana HC adjudged that GST Interest will be paid on Gross GST Liability

Now as per the Finance Bill, a new proviso in sub-sections (1) will be inserted in section 50 of the CGST Act so as to provide for charging interest only on the net cash tax liability, except in those cases where returns are filed subsequent to initiation of any proceedings under section 73 or 74 of the CGST Act.

This proviso is in line with the Press Release published on 22nd December, 2018 after the 31st meeting of the GST Council, where it has principally approved to amend section 50 of the CGST Act to provide that interest should be charged only on the net tax liability of the taxpayer, after taking into account the admissible input tax credit.

Impact of liability when interest is calculated on gross tax basis and net tax basis is explained via the below mentioned example: