Interest to be charged on net tax liability on late GST payments from September 1

blog imageThe government will levy interest on net tax liability of late payment of good & services tax (GST) from September 1. The interest will be payable on net basis by accounting for input tax credits and refunds from September 1 onwards.

Earlier in its 39th meeting in March, however, the GST Council had decided to levy interest on net basis and not gross with retrospectively from July 1, 2017 and law would be amended from the date. It remains unclear why the GST Council’s decision has not been implemented. Tax experts say it will lead to legal cases in case of large taxpayers and harassment for small and medium taxpayers.

Industry leaders had raised their concerns over the GST council diktat for the recovery of Rs 46,000 crore of unpaid interest on GST payment on gross tax liability. Companies asked for levying of interest on net basis which takes into account their input tax credit and refunds. Notably, the government had already issued notices to several business owners demanding interest on gross liability.

However, on Tuesday, the Central Board of Indirect Taxes and Customs (CBIC) notified September 1, 2020, as the date from which interest would be charged on net tax liability.

Finance Minister Nirmala Sitharaman had after the GST Council meeting in March had said, “The Council also decided to levy interest on delaying in paying GST on net basis and not gross basis. For this, GST laws will also be amended with retrospective effect of July one 2017.”

It was aimed at reducing disputes and ease recovery process besides easing cash flow burden for most companies.




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