Calculation of Interest on Net GST Liability w.e.f. September 1, 2020

The taxpayers had earlier raised their concern with respect to the recovery notices issued by the GST Department claiming unpaid interest on delayed GST Payments. The interest was charged on gross tax liability. Considering the above issues being faced by the industry, the GST Council vide its 39th meeting in March 2020 had decided that interest for delayed payment of GST will be levied on net tax liability retrospectively from July 1, 2017 and GST law will be amended accordingly. However, the Central Board of Indirect Taxes and Customs (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 tax liability and it seems that the notification was prospective in nature. The aforesaid notification has confused the taxpayers & professionals. As per 39^th GST Council meeting the issue was kept on rest by levying interest on net liability from appointed date of GST Law and the move was aimed to substantially reduce disputes and ease recovery process, besides easing immediate cash flow burden for most companies under current pandemic scenario. The CBIC took up the matter on priority and immediately issued a press release dated August 26, 2020 clarifying that the notification relating to interest on delayed payment of GST has been issued prospectively due to certain technical limitations. However, it has assured that no recoveries shall be made for the past period as well by the Central and State tax administration in accordance with the decision taken in the 39th Meeting of GST Council. Our Comments The aforesaid amendment read with CBIC press release collectively resolves the issue of interest on gross GST Liability since inception. Moreover it set-aside / subsumes the multiple notices which were issued by the revenue authorities demanding GST on gross liability as well. However, retrospective applicability of this benefit would mean that millions of taxpayers may be looking forward to the Government to issue guidelines for refund of extra interest paid on gross liability for over past 3 years i.e. from the date of GST implementation.   Source: Notification No. 63/2020- Central Tax, dated August 25, 2020 CBIC Press Release date August 26, 2020   Last Updated: 28th August 2020 This article is contributed by:  CA. Vaibhav Matta Assistant Director, Taxation