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August 25, 2020

Delay in Paying GST? Interest is applicable on Net Cash Liability from 1 July 2017 or 1 Sep 2020 as per recent notifications?

by facelesscompliance in GST Circular Notification

Delay in Paying GST? Interest is applicable on Net Cash Liability from 1 July 2017 or 1 Sep 2020 as per recent notifications?

From plain reading of the Notification 63/2000, it seems blunder in drafting notification for effective date for amending Section 50.


Recovery of interest on delayed payment of GST tax only in cash is finally being made effective from 01 September 2020.
Not in line with suggestions by Council and as declared by Hon Finance Minister of India

The Notification says

Interest to be charged on Net liability instead of gross liability was a persistent demand from business & trade and same was considered by GST council. However this notification which says amendment to be applicable from 1 September 2020 is nothing but a breach of trust of taxpayers.

The Press Release on 14 March 2020 states that

The Press Release on 14 March 2020 states that Interest for delay in payment of GST should be charged on Net Cash Liability from 1 July 2017

Notification No 63/2020 Central tax dated 25.08.2020 issued with view to amend Section 50 CGST Act whereby with effect from September 01, 2020, interest shall be calculated on net GST payable. So it can be concluded, till 31st August 2020, interest payable on gross payable

The FM in her Press Briefing said

Can a GST notification be issued contrary to decision by GST Council ? Does CBIC executive have that authority?

GST recent notification on interest liability seems prospective. This Notification will led to further litigation provided CBIC comes with clarifications

The Retrospective Amendment would have resulted in huge revenue loss to exchequer as many taxpayer who has paid interest on gross liability would have demanded refund

The problem will be Tax officers will start sending Notices to the business as calculation of net liability it is prospective. This will lead to lots of litigation on ground and further increase trouble to businesses which are already in losses due to Covid19.

Hopefully CBIC should inform the field officer to not to send SCN for interest paid on net basis between 1 July 2017 and 31 Aug 2020, this would be a relief till there is amendment or further clarification from FM

It appears that the notification could not be made retrospective effect since the Finance Act No 2, 2019 provided that various sections including Section 100 “shall come into force on such date as the Central Government may, by notification in the Official Gazette, appoint” In other words, the date could be only prospective not retrospective

However, since GST council has already decided, it appears there might be a subsequent amendment in Section 50 to make it retrospective

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