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

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.

https://youtu.be/0GEGebLfa6Y

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

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