Interest on GST to be levied on net tax liability from 1st September 2020

Interest on GST to be levied on net tax liability from 1st September 2020
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Interest on GST to be levied on net tax liability from 1st September 2020

  As per the CGST notification no. 63 dated 25th August 2020

Section 100 of the Finance (No. 2) Act,2019 – Amendment to Section 50 of the CGST Act,2017

The effective date for Section 50 of the CGST Act,2017 – Interest on delayed payment of tax has been notified to be 1st September 2020.

Note: The amendment to the section has been made prospectively and not retrospectively.

  • Interest on GST will be computed on net tax liability w.e.f 1st September 2020.
  • Interest on GST will be computed on gross tax liability up to 31st August 2020.

 

section 50 of gst

⊗  As per the Finance Bill 2019 dated 5th July 2019

Following was proposed in Finance Bill 2019,  but it is made effective after the CGST Notification 63  which is issued on 25th August 2020.

  • Interest should be levied only if the tax to be paid in respect of supplies made during a tax period(which is declared in return) is not paid up to the prescribed due date.
  • It shall be levied only on the portion of the tax which is payable by debiting the electronic cash ledger.

Note: If the return is furnished after the commencement of any proceedings u/s 73 and u/s 74 then interest will not be on net tax liability.

Note: Interest can not be paid by utilizing the electronic credit ledger.

Refer amendments to Section 50 >> clause 99 on page 29 of Finance Bill 2019

section 50 of gst

Interest will be calculated on Net Tax liability from 1st September 2020
⊗ As per the recommendations of 31st GST Council Meeting dated 22nd December 2018

If there is a delay in payment of tax or part payment of tax within the prescribed due date THEN

  • Interest is to be calculated on the net tax liability.
    • It is to be calculated on unpaid tax payable after considering the set-off of the admissible input tax credit
    • To put in simple words, it is to be calculated on tax payment required through electronic cash ledger.
  • Interest is to be calculated from the succeeding day of due date upto the date of payment.

Interest = [Unpaid amount from (Tax on outward supply- ITC on inward supply) x 18% x (date of payment – due date of payment)]

(Note: That interest is to be calculated based on the number of days)

Note: The above recommendations of Council and the press release has become effective after CGST Notification no. 63 dated 25th August 2020 has been issued.

Refer press release for amendments in GST Act dated 22.12.18

Interest will be calculated on Gross Tax liability up to 31st August 2020
⊗ As per section 50 of CGST Act,2017

If there is a delay in payment of tax or part payment of tax within the prescribed due date THEN

  • Interest is to be calculated on the gross tax liability. 
    • It is to be calculated on unpaid tax on outward supplies shown in GSTR 1/GSTR 4.
    • It is to be calculated on tax payable without considering any set-off of the eligible input tax credit.
  • Interest is to be calculated from the succeeding day of due date up to the date of payment.

Interest = [Unpaid tax on outward supply x 18% x (date of payment – due date of payment)]

(Note: That interest is to be calculated based on the number of days)

⊗ As per section 41 of CGST Act 2017
  • A taxpayer is entitled to take the credit of eligible ITC for payment of self-assessed output tax liability in the GST return.
  • The date of making the credit entry in the electronic credit ledger is important as only upon the filing of the return on a self-assessment basis the credit becomes available to the electronic credit ledger for paying the output tax liability.


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CA Ankita Khetan
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