GST : Interest to be calculated only on NET cash tax liability

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GST: Interest to be calculated only on NET cash tax liability

What will change with an amendment in section 50?

After the amendment

From now the interest on delayed payment of GST will be charged only on the net cash tax liability. It will be charged only on the portion of the tax liability which is to be paid by debiting the electronic cash ledger. It will be a huge relief for the taxpayers.

Before the amendment

Interest on delayed payment of GST was charged on the entire tax liability without considering any set-off of the eligible input tax credit.

How the change in the amendment was passed?

Changes which were recommended in 31st GST Council Meeting and which were proposed in the Finance bill 2019 on 5th July 2019 have got in-principal approval in both the houses of parliament.

  • First recommended in 31st GST Council Meeting on 22nd December 2018
  • Then in the Finance bill (no. 2) 2019 dated on 5th July 2019
  • Then in Lok Sabha passed the bill on 18th July 2019
  • Then in Rajya Sabha passed the bill on 2nd August 2019

What will be the effective date?

The effective date of the amendment is generally mentioned in the Finance Bill only. But for the amendment in section 50 of CGST Act,2017 the effective date was not mentioned in the Finance Bill 2019. So it will become effective on the date assent from the President of India is obtained.

⊗ Recommendations in 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 should 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)

Refer press release for amendments in GST Act dated 22.12.18

Proposal in Finance Bill 2019 dated 5th July 2019

Following was proposed in Finance Bill 2019,  it is effective now as it has got in-principal approval from both the houses of parliament.

  • 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 upto 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

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About CA Ankita Khetan 164 Articles
Ankita is a Chartered Accountant in practice and holds a Diploma in IFRS (from ACCA, UK). She is also a Commerce PG and Certified Independent Director (from IICA). She holds a certification in Forex and Treasury Management. Her area of expertise is GST and Income tax. She is passionate about reading, writing, and sharing knowledge on areas related to finance and taxation.

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