Representation against contention of GST Department for interest liability u/s. 50 on ITC component


A recent “Standing Order” No.01/2019 [C.No: IV/16/32/2019–CT (Tech.)] issued by the Principal Commissioner of Central Tax, Hyderabad on 04-02-2019, instructs GST Tax Officials and field formation Officers to inquire into cases of late filing of returns, where asseseees has paid interest only on the net tax liability of GST and further instructing to issue recovery notices u/s 79 of CGST/SGST Act in all such cases where interest on the ITC Component of overall tax liability is not paid, arising or accruing due to late filing of GSTR-3B returns. Similar view is being taken on the part of department officials while inquiring into reasons for delay in filling of returns.

This “Standing Order” was issued without any regards to the already made announcement of the outcome of the 31st GST Council duly declared through press release dated 22-12-2018, that suitable amendment in section 50 of the CGST Act is to be made 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, i.e. interest would be leviable only on the amount payable through the electronic cash ledger. The view taken by the GST officials is detrimental to the interest of the tax payers on the ground that Interest is levied whenever there is delay in recovery of tax due to the government. However, when any sum of monies represented as ITC are already available to the credit of the Government, then there is no loss of revenue or delay in collection of tax wherever GST liability is settled with balance in credit ledger since to the extent of credit balance, tax is not payable in cash.

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