Introduction There has been a new law raising new doubts, this article has been aimed to assist a taxpayer to understand the interest for the delayed payment of tax provisions under GST. There have been a number of cases, where error has been done by the tax payers while uploading the Form GSTR-3B, which resulted in short payment of tax, which was left unfiled, for want of revision/amendment. Such errors gets rectified only on filing of the proper GSTR-1, GSTR -2 and GSTR- 3, in which case there has been doubt expressed on the applicability of the interest. This article aims at such conclusion.
Payment of tax under GST
Before we get into the interest for the delayed payment of tax, one has to understand the requirement of the payment with the various accounts/register a tax payer need to maintain under the GST law in the GSTN portal. Following are the short description of different types of ledgers:
a) Electronic cash ledger: Every deposit made towards tax, interest and penalty shall be credited to the electronic cash ledger (refer Section 49(1) of CGST Act, 2017).
b) Electronic credit ledger: Every claim of input tax credit claimed by registered person shall be credited to the electronic credit ledger maintained by registered taxable person (refer Section 49(2) of CGST Act, 2017) .
c) Electronic liability register: All the liabilities of a registered person shall be debited to the electronic liability register and shall be credited on debiting either electronic cash ledger or electronic credit ledger. (refer Section 49(7) of CGST Act, 2017) In terms of section 49 of CGST Act, 2017, payment of tax shall be said to be made only when the electronic liability register has been credited with either electronic cash ledger or electronic credit ledger. Further it is important to note that, the electronic liability register can be credited only at the time of filing the monthly return, i.e., GSTR-3B / GSTR-3.
Therefore it is very important to keep in mind that there GST liability shall be considered to be discharged only after filing the return, despite of having sufficient balance in the electronic cash or credit ledger.
Interest on Delayed Payment of tax under GST
Having understood the payment of tax, now we shall proceed to understand the implication of the delay in payment of tax as provided in Sec 50 of CGST Act, 2017. Every person who fails to pay the tax within due date, shall be liable to pay interest @ 18% p.a. for the period for which the tax remain unpaid from the due date.
Thereby, by it is clear that unless the monthly return is filed (GSTR-3 or GSTR- 3B), the payment is yet to be made and thereby having sufficient balance in the account (e-cash ledger or e-credit ledger) has no relevance for the computation of the interest.
Hence, it can be concluded that, the delay in filing of the return, amounts to delay in payment of tax, which would lead to further interest on the total liability and not on the net amount payable in Challan at the time of filing the return.
To understand the same with an example, assuming a case where the GST liability for the month of Sep’17 is Rs. 10L, Credit available for the month is Rs. 4L and amount deposited, which is credited to cash ledger, is Rs. 6L, Due date for filing GSTR-3B & Payment of tax is 20th October, Date of deposit of cash is 18th October and date of filing GSTR-3B is 25th Oct’17. In this case, since the return is filed on 25th Oct’17, the Gross liability of Rs. 10L shall be deemed to be outstanding for the period of 5 days and interest @ 18% p.a. should be paid for that period.
Other school of thought
Interest for the delayed payment of tax is considered to be levied for the reason that there would be a loss to Government, to the extent of such delay. However, in the case where there is sufficient balance with the credit of the Government, there would be no loss to the treasury Considering this the law being defeating the basic philosophy on levy of interest can be challenged in the writ jurisdiction.
In the cases where the error has happened by the tax payer in filling the details being very new to the GST taxation system, not having amendment option, due dates unduly extended without any control of the tax payer to rectify the interest arising thereof can the tax payer be responsible?. In the view of the paper writer although legal there appears to be liability to pay interest, a representation have to be made for waiver of interest in such case and also where there is huge impact, filing of the writ petition in the high court may also be examined. However, taxpayer has to ensure availability of the sufficient balance in credit/cash ledger to the extent of liability before taking any further steps in this regard. -
CA Sudhir VS -CA Vamshi -Bharath