Administrative instructions issued to recover interest on Net Cash Tax Liability w.e.f. July 01, 2017

Central Board of Indirect Tax and Customs (CBIC) vide circular number F. No. CBEC-20/01/08/2019-GST dated September 18, 2020 has issued administrative instruction for recovery of interest on net cash tax liability w.e.f. July 01, 2017. The said order has been addressed to all the Commissioner of Central Tax and Director General.

Initially, based on recommendation of 35th GST Council Meeting dated June 21, 2019, it was decided that interest on delayed payment of GST to be charged on net cash tax liability with effect from the notified date. This change was also enacted via amendment made by Finance Act (No. 2), 2019. Further, in 39th GST Council Meeting dated March 14, 2020, it was recommended that interest on net cash tax liability should be charged retrospectively. However, CBIC, vide Notification No. 63/ 2020 – Central Tax (CT), dated August 25, 2020, notified September 1, 2020, as the date from which interest would be charged on net cash tax liability.

In order to clarify the above anomaly, CBIC issued a press release dated August 26, 2020 that this amendment is made prospective due to technical limitations. It was clarified that the authorities will not make recovery for past period based on gross GST tax liability.

There were still apprehensions amongst stakeholders for recovery of interest for period prior to September 1, 2020 on gross tax liability. Accordingly, CBIC issued the captioned administrative instructions directing as under:

• Recovery of interest for the period July 01, 2017 to August 31, 2020 will be on net cash tax liability basis; and
• Show Cause Notices being issued in the past on gross tax liability basis is to be kept in Call Book till the retrospective amendment is made under the GST Law.

Source: Instruction F.No. CBEC-20/01/08/2019-GST, dated September 18, 2020

Last Updated: 24th September 2020 This article is contributed by: 

CA Vaibhav Matta Assistant Director, Taxation