Applicability of Interest U/s 50(1) of CGST Act 2017
Proviso to Section 50(1) was amended with retrospective effect from 1st July 2017 to provide that interest shall be charged on tax liability net of ITC credit. However due to the language used, the interest on gross tax liability would be payable if the tax liability is reported in subsequent period returns and not in the month of origin. This issue has been discussed and explained with the help of case studies.

Here, we will discuss the interest provisions as covered under section 50(1) of the Central Goods and Services Tax Act, 2017. Section 50(1) talks about the levy of interest on delayed payment of tax.

Notably, after various litigation, controversies and GST council recommendation, the Government has amended the proviso to section 50(1).

Accordingly, the amendment proviso to section 50(1) states that the interest on tax payable in respect of supplies made during a tax period and declared in return for the said tax period furnished after due date, as per provisions of section 39, shall be payable on that portion of the tax which is paid by debiting the ‘electronic cash ledger’.

Notably, the above benefit is not available when the return is furnished after commencement of any proceedings under section 73 or section 74 of the Central Goods and Services Tax Act, 2017.

The above amendment in respect of proviso to section 50(1) is given retrospective effect i.e., the provisions are effective from 1st July 2017.

Thus, after insertion of proviso it is clear that interest is payable on only that portion of tax which is paid by debiting the ‘electronic cash ledger’. Hence, interest is not payable on the portion of tax which is paid by debiting the ‘electronic credit ledger’.

Here, it is important to note that in case the taxpayer furnishes the value of supply of current month in subsequent month. Then, the benefit of the proviso will not be available and the taxpayer will have to pay interest on the entire tax payable whether the same is debited via ‘electronic cash ledger’ or ‘electronic credit ledger’.

Hope the above has clarified the position of interest in terms of provisions of section 50(1) of the Central Goods and Services Tax Act, 2017.
#CGST #Interest #GST
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