No harsh steps should be taken to recover interest on “Gross GST Liability”

The Central Board of Indirect Taxes and Customs (CBIC) asked their officers to collect about ₹46,000 crores as interest on delayed payment of goods and services tax (GST) on the basis of gross tax liability i.e. the tax liability without adjusting the input tax credit (ITC) available in the electronic credit ledger. The government says that if a taxpayer is required to pay tax of ₹1 crore but has available ITC of ₹99 lakh and if there is an delay payment of the due tax of ₹1 lakh after adjusting the ITC, then interest must be paid on the gross tax liability of ₹1 crores.

However , as we learnt that this position has been upheld by the Telangana High Court in the case of Megha Engineering and Infrastructures. [2019 (26) GSTL 183 (Telangana)] where amount will be payable , after adjusting the available ITC. The GST Council, in their meeting on 22nd December 2018, had accepted this stand and recommended charging interest only on the net lax liability. The central government has also covered this amendment u/s 50 of the Central GST Act, 2017. But this has not yet notified but centre has assured that the same will be given effect as soon as the two remaining states i.e.Telangana and West Bengal amens their respective state laws .

The CBIC says that all interest on delayed payment of tax till the amendment takes effect will be on the basis of gross tax liability only.

Against this issue , Madras High Court, in the case of in the case of M/s Refex Technologies (2020-TIOL-382-HC-MAD-GST) has held that the amendment allowing payment of interest on the basis of net tax liability is clarificatory and retrospective in its operation. Where the tax payers has started receiving the notices for interest , some approached the courts and the Gujarat High Court, in the case of Amar Cars, stayed the notice demanding such interest and asked the government to respond.

In this case , court ruled that,”Let notice be issued to the respondents, returnable on 11.03.2020.Having heard the learned counsel appearing for the writ-applicant and having gone through the materials on record, we direct the respondents not to take any coercive steps for the purpose of recovery of the interest.

To be heard along with Special Civil Application No.18198 of 2019. Direct service is permitted.

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