GST INTEREST RELIEF ON THE CARDS?
NEW DELHI: Businesses facing the prospect of having to pay around ~46,000 crore as interest on delayed payment of Goods and Services Tax may get a reprieve, with the government considering calculating the interest only on their net tax liability, and with retrospective effect. ››P17
NEW DELHI: Businesses facing the prospect of having to pay around ₹46,000 crore as interest on delayed payment of goods and services tax (GST) may get a reprieve, with the government considering calculating the interest only on their net tax liability, and with retrospective effect . The finance ministry hasn’t yet calculated the savings that would accrue to assessees as a result.
“The issue is expected to be raised at the next GST Council meeting on March 14, which will take a final call on this matter,” one of two officials who briefed HT about the plan said on condition of anonymity. The federal council, which has representation from states, is the apex decision-making body on GST matters, and is chaired by the Union finance minister.
The current position of the Central Board of Indirect Taxes and Customs (CBIC) is a rigid one—that interest will be calculated on gross GST. And so, it has calculated the dues on the basis of gross GST liabilities of assesses.
Meanwhile, citing a GST Council decision , taxpayers have challenged the methodology in various tribunals, saying interest should be calculated on the basis of net tax liability after factoring in assesses’ input tax credit (ITC).
Gross GST is the total tax liability of the assesses on the sale of goods and services without any input tax credit being deducted. ITC is available to all assesses on taxes paid on all procurements. Net GST liability is the difference between gross GST and ITC).
Experts said the issue rattled taxpayers on February 10, when CBIC issued an internal memo directing field offices to collect ₹46,000 crore from GST assessees.
The CBIC action was not in tune with the GST Council’s decision on December 22, 2018 at its 31st meeting. The Council decided to amend Section 50 of the Central GST Act to provide that interest be charged only on the net tax liability of the taxpayer, after taking into account the admissible input tax credit. The amendment was passed by Parliament in July 2019 along with the Budget [the Finance (No.2) Act, 2019] and received a presidential nod on August 1.
According to CBIC, as the amended Act has not yet been notified, the old position on calculation of interest is the legal position, hence assesses should pay interest on the gross amount of tax. “The GST laws, as of now, permit interest calculation on delayed GST payment on the basis of gross tax liability. This position has been upheld in the Telangana high court’s decision dated 18.04.2019,” CBIC said in a series of tweets on February 15.
The finance ministry did not respond to e-mails seeking comment.
CBIC also clarified that the interest will be calculated on the basis of net tax liability prospectively only after the government notifies the December 22, 2018 decision of the GST Council. “In spite of this position of law and the Telangana high court’s order, the central government and several state governments, on the recommendations of GST Council, amended their respective CGST/SGST (central GST/state GST) Acts to charge interest on delayed GST payment on the basis of net tax liability. Such amendments will be made prospectively,” CBIC tweeted.
Mekhla Anand, partner at the legal firm Cyril Amarchand Mangaldas, said the provisions of amended laws should be notified retrospectively from July 1, 2017.
The second official, who works in the finance ministry, said the amended law will be notified soon after two remaining states – Telangana and West Bengal—also amend their respective state GST laws.
“However, the notification will have prospective effect unless the GST Council decides otherwise,” he added on condition of anonymity.
MS Mani, partner at Deloitte India, said: “Several businesses which had made a delayed payment during the early days of GST have been grappling with show cause notices, which have been issued due to the prospective nature of the amendment. Industry would heave a sigh of relief if the GST Council takes up the matter in the next meeting and decides that the amendment was effective from July 1, 2017.”