2021 (3) TMI 645 - HC - GST

Levy of Interest on the gross liability - Respondent-State by way of supplementary counter affidavit has made a categorical statement that after issuance of the Administrative Instructions by CBIC, the State authorities are also imposing interest on Net Tax Liability - Section 50 of Goods and Services Tax Act, 2017 - HELD THAT - There is no purpose in keeping the writ petitions pending for decision on the challenge to the appellate order made herein on the grounds urged. However, liberty is reserved with the petitioner to approach the Court in case the respondent State chooses to realize interest on the gross tax liability for the subject period covered under the appellate order. Petition disposed off.

Summary

Issues:
Challenge to appellate order confirming interest on gross tax liability under Section 50 of Goods and Services Tax Act, 2017.

Detailed Analysis:
In a batch of writ petitions, the common issue revolved around the challenge to the appellate order confirming the imposition of interest on the petitioner under Section 50 of the Goods and Services Tax Act, 2017, on the gross tax liability. The total interest liability amounted to ?1,10,02,192 for the period from April 2018 to January 2019. The petitioner contended that they had discharged the interest liability on the net tax liability through an electronic tax ledger. Reference was made to a communication issued by the Central Board of Indirect Taxes and Customs on the recovery of interest on net tax liability effective from July 1, 2017. The petitioner argued that recovery of interest on gross tax liability would be unfair post the CBIC's decision. The petitioner also cited a Bombay High Court decision and similar decisions by other High Courts supporting the recovery of interest on net cash liability.

The Respondent State, through a supplementary counter affidavit, highlighted administrative instructions related to Section 50 of the GST Act, 2017, issued by the CBIC on September 18, 2020. These instructions directed the imposition of interest on late tax payments from the cash ledger, specifically on the net cash tax liability. The State authorities were following these instructions in imposing interest on the net tax liability. The State's participation in GST Council meetings and adherence to decisions taken by the Council were also emphasized.

Upon considering the submissions and the CBIC circular, the court noted the State's categorical statement on imposing interest on net tax liability post the CBIC's administrative instructions. Consequently, the court disposed of the writ petitions, indicating that there was no need to keep them pending for a decision on the challenge to the appellate order. However, the petitioner was granted liberty to approach the court if the State decided to realize interest on the gross tax liability in the future for the period covered under the appellate order.

In conclusion, the writ petitions were disposed of in light of the State's stance on imposing interest on net tax liability, with the petitioner retaining the liberty to seek redress if interest on gross tax liability was pursued by the State in the future.