2022 (9) TMI 935 - HC - GST

Levy of interest on the delayed payment of tax, on the gross tax liability of the petitioners instead of net liability - section 50 of the Central Goods and Services Tax Act, 2017 - HELD THAT - In view of the Notification No. 16 of 2021, the proviso which is substituted vide sub-section 50(1) of the CGST Act w.e.f. 1st day of July, 2017, therefore, would take care of the issue raised in this group of petitions of charging interest on the net GST liability instead of gross GST liability as calculated by respondent No.3. These petitions are disposed of as having become infructuous in view of the amendment of section 50(1) of the CGST Act by substituting the proviso w.e.f. 1st day of July,2017 as per section 112 of the Finance Act, 2021 which has been made effective vide Notification No. 16 of 2021 dated 01.06.2021.

Summary

Issues:
Challenge to levying interest on delayed tax payment based on gross tax liability instead of net liability under CGST Act and GGST Act.

Analysis:
In a series of petitions, the petitioners contested the authorities' action of charging interest on delayed tax payments based on gross tax liability rather than net liability as per section 50 of the Central Goods and Services Tax Act, 2017 and Gujarat Goods and Services Tax Act, 2017. The Respondent-Superintendent of Central Goods and Services Tax demanded interest on delayed tax payments by calculating it on the gross GST liability, contrary to the petitioners' claim of interest being charged only on the net liability after considering admissible credit.

The petitioners argued that the 31st GST Council Meeting decision mandated interest to be levied on the net liability of taxpayers, accounting for admissible credit. They highlighted that section 49 of the CGST Act allows input tax credit to be credited to the electronic credit ledger for payment towards various tax components, emphasizing that the available credit should be used for offsetting output tax.

Moreover, the petitioners pointed out that the Finance Act, 2021, through section 112, amended section 50 of the CGST Act to address their concerns. The amendment, effective from July 1, 2017, stipulated that interest on delayed tax payments should be computed on the portion paid by debiting the electronic cash ledger, thereby aligning with the petitioners' contention of charging interest on the net GST liability.

The submission referenced Notification No. 16 of 2021, issued by the Government of India, Ministry of Finance, which notified the amendment to section 50 of the CGST Act. Both the petitioners and respondent-authorities acknowledged that the amendment effectively resolved the issue of charging interest on gross GST liability by introducing the proviso under section 50(1) of the CGST Act.

Consequently, the petitions were deemed infructuous due to the amendment of section 50(1) of the CGST Act, as per the Finance Act, 2021. The court directed the respondents to implement the amendment within twelve weeks of the order receipt, thereby vacating any interim relief granted earlier. The notice was discharged, bringing closure to the legal proceedings.