Levy of Interest on belated GST cash remittance upheld by HC

What is section 50 of the CGST act, 2017?

Section 50 of the CGST act, 2017 deals with Interest on late payment of GST. As per Section 50 (1) Every person who is liable to pay tax in accordance with the provisions of this Act or the rules made thereunder, but fails to pay the tax or any part thereof to the Government within the period prescribed, shall for the period for which the tax or any pad thereof remains unpaid, pay, on his own, interest at such rate, not exceeding eighteen per cent, as may be notified by the Government on the recommendations of the Council.

Fact and Issue of the case

The petitioner has challenged order dated 27.01.2021 levying interest under Section 50 of the Central Goods and Services Tax Act, 2017 (in short ‘Act’) relating to both interest on cash remittances as well as remittances by way of adjustment of electronic credit register.

Observation of the court

As far as levy of interest on cash remittance is concerned, learned counsel for the petitioner only relies on the provisions of Section 42 of the Act which provides for a notice to be issued by the Assessing Authority in the case of mismatch of particulars at the end of the assessee, vis-a-vis, particulars/details furnished in the returns of the selling/purchasing dealer.

In this case, the provisions of Section 42 are not relevant, insofar as the impugned order itself records that the assessee has, on receipt of intimation of the wrongful claim of input tax credit (ITC), accepted the error in claim and has reversed ITC, both attributable to CGST and SGST through voluntary payment of tax in Form GST DRC-03.

The provisions of Section 42 can only be invoked in a situation where the mismatch is on account of the error in the database of the revenue or a mistake that has been occasioned at the end of the revenue. In a case where the claim of ITC by an assessee is erroneous, as in this case, then the question of Section 42 does not arise at all, since it is not the case of mismatch, one of wrongful claim of ITC.

As far as the levy of interest on belated cash remittance is concerned, it is compensatory and mandatory and the levy is upheld to this extent.

The impugned order is modified to the extent as indicated above and this Writ Petition stands disposed. No costs. Connected Miscellaneous Petition is closed.