Interest Payment on net GST Liability

CBIC has issued Notification No 63/2020 – Central Tax dated 25^th August, 2020 bringing into effect the provisions of Sec 100 of the Finance Act, 2019, which is reproduced below –

Sec 100. In section 50 of the Central Goods and Services Tax Act, in sub-section (1), the following proviso shall be inserted, namely –

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 levied on that portion of the tax that is paid by debiting the electronic cash ledger.”

Section 50 of CGST Act 2017 was amended by Finance (No. 2) Act, 2019 (23 of 2019) by inserting a proviso to section 50(1) of the CGST Act, 2017 from a date which the government notify in this regard. Section 50 deals with payment of Interest on GST on Gross tax liability instead of net amount.

CBIC has now notified that the interest will be applicable on net amount with effect from 1st day of September, 2020 vide Notification No. 63/2020-Central Tax, dated. 25th August, 2020.

In its 39^th Meeting on 14^th March 2020, the Council declared that Interest on delayed payment of GST to be charged on Net Cash Tax liability w.e.f 1^st July 2017 and law shall be amended retrospectively.

Yes, you read it right. Even though GST Council declared that law shall be amended retrospectively, the notification is made effective from 1^st September 2020.

Update :

A Press Release on Interest on delayed payment of GST has been issued by CBIC :

The Central Board of Indirect Taxes & Customs (CBIC) today clarified that the Notification No. 63/2020-Central Tax dated 25^th August 2020 relating to interest on delayed payment of GST has been issued prospectively due to certain technical limitations. However, it has assured that no recoveries shall be made for the past period as well by the Central and State tax administration in accordance with the decision taken in the 39^th Meeting of GST Council. This will ensure full relief to the taxpayers as decided by the GST Council.

CBIC explanation came in response to an assortment of comments in the social media with respect to Notification dated 25^th August 2020 regarding charging of interest on delayed payment of GST on net liability (the tax liability discharged in cash) w.e.f. 1^st September 2020.

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