GST authorities have been asked to collect interest amounting to ₹46,000 crores for the delayed payment of the GST. It is expected that various taxpayers will face notices as most of the taxpayers have filed their taxes late in the initial years. Even though it was the fault of the department as there were technical problems going on with the website , Officials blame payers for very low compliance. Since the law mandates that interest due on this delayed payment , CBIC saying they are not wrong in enforcing this.
According to current structure, the interest on late payment has to be computed based on the gross tax liability, without deducting the input tax credit on it. This is due to the fact that the payment of GST liability is through two components : the cash component and the input tax credit. If the GSTR 3B is filed late, the CBIC was originally mandated to collect interest on the gross liability. However, the GST Council had rectified this and the law had been duly amended to make the interest payable on the net liability, after accounting for the input tax credit. But though the Central GST Act has been amended, all States have to amend their respective State GST Acts to make this change effective. Since there has been delay by Telangana and West Bengal in rectifying their respective laws, the amendment to the Central GST Act is yet to be notified. Until that is done, interest on late payment has to be collected on gross tax liability.
Tax authorities could have considered waiving the interest on late payment for the first year as the technical glitches and speed of the GSTN network is not their fault . Now, when the new returns for GST filing to be implemented from the next financial year , the problems for taxpayers are expected to continue as government is focusing more on the recovery rather than taking care of their root faults.
Tax officials should have waited until all the States pass the necessary amendment orders with their respective ACTS .