The Central Board of Indirect Taxes & Customs (CBIC) has asked GST officials to collect interest of nearly ₹46,000 crore on account of delayed payment of the Goods & Services Tax (GST).

But experts feel this could lead to widespread tax litigations and inconvenience to taxpayers.

GST assessees (barring those with turnover up to ₹1.5 crore and who have opted for the composition scheme) need to file two monthly returns — GSTR 1 (shows tax liability) and GSTR 3B (actual tax payment). GSTR 1 to be filed by 11th day of the following month and GSTR 3B by the 20th.

There have been instances where assessees file GSTR 3B after the due date without paying interest on the delayed payment. The new order is related to this issue.

Special Secretary and Member in the Board, AK Pandey, in a letter to the Principal Chief Commissioner and Chief Commissioner, said that according to law, the tax payer has to assess and pay interest on delayed payment of GST.

Further, interest payable on such tax payment can be recovered through various methods.

The Principal Additional Director General (Systems) in the Tax Department generated and shared the GSTIN-wise list of the assessees, who have not discharged the due interest liability on delayed filing of GSTR 3B returns. According to the letter, the total interest amount due was ₹45,996 crore. Now, process has been initiated to recover this interest.

Interest on tax liability

Doubts were raised over whether interest has to be paid on the gross tax liability or on the net tax liability. The board said that the law is clear and interest liability has to be paid on the tax liability that is paid belatedly, either through cash or utilisation of input tax credit (ITC).

In other words, interest has to be paid on the total tax liability as shown in GSTR 3B.

The letter requested the key official to look into the matter personally and "to urge the field formations under your jurisdiction for making recovery of applicable interest from the identified taxpayers." All the officials have been asked to update about recovery made on a weekly basis.

’Not good news’

But experts feel that this is not good news for the assessees.

Rajat Mohan, Senior Partner with AMRG, said legislatively GST is so designed that the taxpayer needs to pay interest on the gross amount of tax without any concession of the input tax credit in case of delay in filing of tax returns, which is harsh on the taxpayers as it is devoid of the natural justice principle.

"Principally no person should be punished twice for the same offence. Under GST, every taxpayer is mandated to pay late fees for delay in the filing of tax returns and also interest at the rate of 18 per cent on gross tax liability. Tax authorities should not look to bridge the revenue deficit by imposing huge costs on the taxpayers for procedural lapses," he said.

 13 Feb 2020, 10:02 AM