One way Interest Calculator in GSTR-3B, is it justified?

[niranjan gupta]

Goods and Services Tax Network (GSTN) is the backbone of Goods and Services Taxes, which is the interface between the taxpayers and the government for tax compliance. The entire process of GST is online, starting from registration to the filing of returns, assessments, adjudication and appeals.

Recently GSTN has released the interest calculator functionality in monthly tax payment form GSTR-3B to facilitate taxpayers in doing self-assessment. This functionality will assist taxpayers in calculating the interest applicable for delayed payment of tax. Taxpayers will have to verify and discharge the correct interest liability as per law, as payment of interest is a statutory compliance.

The Author of this article appreciate the move of government to provide this facility in the direction of further reducing the compliance burden for taxpayers but it is one side of the coin. Similar facility should be provided to the taxpayers in case of refunds. It has been observed that the refunds are not allowed timely to the taxpayers and if the refunds are given, the interest for delayed payment of refund by the department is not never allowed to the taxpayers.

Relevant provision

Pursuant to Section 50 of the CGST Act, 2017 interest is payable for delayed payment of GST. The interest computed by the GST Portal has been developed as per provisions of Section 50 of the CGST Act, 2017.

Facility for auto-computation of interest for GSTR-3B

The interest applicable will be auto-populated in the Table-5.1 of the GSTR-3B of the next tax-period. The facility would be similar to the collection of Late fees for GSTR-3B, filed after the due date, posted in the next period’s GSTR-3B. This functionality will inform the taxpayers about the manner of system computed interest for each tax-head and hence will assist the taxpayers in doing correct computation of interest for the tax liability of any past period declared in the GSTR-3B for the current tax period.

Interest Calculator

Consequently, interest liability for respect of supplies made during the present tax-period and declared in the GSTR-3B for this period will be calculated only on that portion of the tax which is paid by debiting the electronic cash ledger, i.e., tax paid in cash. With respect to the liability pertaining to the previous tax-periods, and paid in later GSTR-3B, the interest will be computed for the entire liability, whether paid by debiting the electronic cash ledger or electronic credit ledger.

The system will not stop the users from changing the system computed interest values. However, the system will warn the taxpayers on downward editing of the interest values in any tax head. On downward editing of values, the concerned cell will become Red and the system computed values will also be shown during mouse hovering to caution the taxpayer from making a mistake.

The Author of this article is of the opinion that this change will surely enhance the user experience by affording them the necessary tools to compute precise interest liability and enable authorities in a timely collection. Now, the Author would like to shed light on the important aspect of getting the similar facility to the taxpayers in case of refund also.

Refund mechanism under GST

Pursuant to Section 54 of the CGST Act, 2017, GST refund is a process in which, registered taxpayers can claim excess amount if they paid more than the GST liability. They can claim after submitting a refund application i.e. RFD-01 with the necessary details in the GST portal and the same shall be processed electronically.

It is pertinent to note here that the cash flow and working capital requirements of every registered taxpayer could be adversely affected if a refund is delayed. As a result, one of the intentions to implement GST is to ensure that the refund process is smoother so that the taxpayers do not face issues due to delays. Therefore, a proper refund mechanism is necessary for effective tax administration, as trade is facilitated via the release of blocked finances for modernization, expansion, and working capital requirements of a business.

Non-clarity of time limits specified under law

As per the provisions under GST, in case of a refund other than a cash ledger refund, the officer is required to issue an acknowledgement within 15 days of filing the application if he is satisfied that the application is complete in all respects and where the officer is satisfied that the whole or part of amount claimed as refund is refundable, he is required to issue order within 60 days from the date of application complete in all respects.

In case where deficiencies are noticed, the proper officer shall issue a deficiency memos. Further, there are no timelines specified under the law for issuing deficiency memo. However, on a thorough reading of the detailed Circular No.125/44/2019-GST dated November 18, 2019, it can be interpreted that the timelines of 15 days apply to both.

However, practically, these timelines are not being adhered to, and neither acknowledgement nor deficiency memo are being issued in certain refund applications for more than a year. Thus, the very purpose of introducing the timelines, i.e. faster refunds, is way far to achieve. Further, the Government has to come again and again with some special drives for closing a large number of pending refund cases due to such lacunae in law.

During refund proceedings, the proper officer has to issue a deficiency memo if any correction is required to be made by the taxpayer. The said clarification or additional information can be obtained through a notice issued via GST Portal. However, multiple notices are being sent directly on the mail IDs of taxpayer seeking multiple clarifications through various letters. However, there is no update on the portal, and the status quo of the application remains the same as pending.

As per legal provisions, once the officer issues deficiency memo, fresh refund application needs to be filed. There is no provision in GST that allows to rectify the deficiencies specified by the officer. In some cases of refund like inverted duty structure, filing a fresh application is a tedious and time consuming task that leads to delay in refund and also creates a lack of confidence amongst taxpayer

Similarly on the basis of above-mentioned grounds the author of this article would like to humbly put forth the suggestion that the government should come up with proper and speedy mechanism for payment of refund along with the interest where the payment of said refund is delayed to the taxpayers. This would help in enhancing the confidence of honest tax payer’s on the tax system. There is an auto system for payment of interest under the Income Tax Laws. Interest is given along with refund of Income tax.

Conclusion

The Government is trying to put an end to the amassed disputes by issuing various clarifications and changes like the allowance of withdrawal of refund application, exclusion of time from the filing of application till the date of issuance of deficiency memo from the two year limitation period for filing the refund application, special drives for early refund processing, etc. Currently, there is no statutory time limit for grant and payment of refund by the tax authorities. Further, the challenge faced by tax payer in obtaining tax refund creates an unfavorable scenario. It is suggested that having a time based procedure for grant and payment of refund along with interest would help in re-building tax payer’s confidence on the tax system. These areas need to be codified properly.