Retrospective amendment for payment of interest on net tax liability notified w.e.f. July 1, 2017

Background:

The Ministry of Finance issued Press Release dated May 28, 2021 pertaining to decisions taken in 43^rd GST Council meeting wherein recommendations was made for notifying changes made in Section 50 of the Central Goods and Services Tax Act, 2017 (“CGST Act”) at the earliest. Following notification has been issued in this regard:

Notification:

The CBIC vide Notification No. 16/2021- Central Tax dated June 1, 2021 notified changes made vide Section 112 of the Finance Act, 2021 in proviso to Section 50(1) CGST Act payment of interest on net tax liability retrospectively w.e.f. July 1, 2017.

Relevant provision:

Proviso to Section 50(1) of the CGST Act substituted w.e.f. July 1, 2017:

“50. Interest on delayed payment of tax.

(1) Every person who is liable to pay tax in accordance with the provisions of this Act or the rules made thereunder, but fails to pay the tax or any part thereof to the Government within the period prescribed, shall for the period for which the tax or any part thereof remains unpaid, pay, on his own, interest at such rate, not exceeding eighteen per cent., as may be notified by the Government on the recommendations of the Council.

Provided that the interest on tax payable in respect of supplies made during a tax period and declared in the return for the said period furnished after the due date in accordance with the provisions of section 39, except where such return is furnished after commencement of any proceedings under section 73 or section 74 in respect of the said period, shall be payable on that portion of the tax which is paid by debiting the electronic cash ledger.”

Our comments:

Despite the 39^th GST Council’s recommendation in place with regard to imposing interest liability retrospectively on net tax liability, the government still chose to appoint September 1, 2020 as the date when proviso to Section 50(1) of the CGST Act was made effective. Though, press release and instructions were issued to clarify for recovery of interest on net tax liability w.e.f. July 1, 2017, but still litigations were seen. With this retrospective substitution, the issue will now be finally settled.

The Notification can be accessed at: https://www.cbic.gov.in/resources//htdocs-cbec/gst/notfctn-16-central-tax-english-2021.pdf

Background:

The Ministry of Finance issued Press Release dated May 28, 2021 pertaining to decisions taken in 43^rd GST Council meeting wherein recommendations was made for notifying changes made in Section 50 of the Central Goods and Services Tax Act, 2017 (“CGST Act”) at the earliest. Following notification has been issued in this regard:

Notification:

The CBIC vide Notification No. 16/2021- Central Tax dated June 1, 2021 notified changes made vide Section 112 of the Finance Act, 2021 in proviso to Section 50(1) CGST Act payment of interest on net tax liability retrospectively w.e.f. July 1, 2017.

Relevant provision:

Proviso to Section 50(1) of the CGST Act substituted w.e.f. July 1, 2017:

“50. Interest on delayed payment of tax.

(1) Every person who is liable to pay tax in accordance with the provisions of this Act or the rules made thereunder, but fails to pay the tax or any part thereof to the Government within the period prescribed, shall for the period for which the tax or any part thereof remains unpaid, pay, on his own, interest at such rate, not exceeding eighteen per cent., as may be notified by the Government on the recommendations of the Council.

Provided that the interest on tax payable in respect of supplies made during a tax period and declared in the return for the said period furnished after the due date in accordance with the provisions of section 39, except where such return is furnished after commencement of any proceedings under section 73 or section 74 in respect of the said period, shall be payable on that portion of the tax which is paid by debiting the electronic cash ledger.”

Our comments:

Despite the 39^th GST Council’s recommendation in place with regard to imposing interest liability retrospectively on net tax liability, the government still chose to appoint September 1, 2020 as the date when proviso to Section 50(1) of the CGST Act was made effective. Though, press release and instructions were issued to clarify for recovery of interest on net tax liability w.e.f. July 1, 2017, but still litigations were seen. With this retrospective substitution, the issue will now be finally settled.

The Notification can be accessed at: https://www.cbic.gov.in/resources//htdocs-cbec/gst/notfctn-16-central-tax-english-2021.pdf