CBIC issued Notification No. 63/2020 – Central Tax dated 25th August, 2020. Vide this notification CBIC has notified proviso to section 50(1) of the CGST Act, 2017, with effect from 01st September 2020. The proviso provides that, interest on delayed payment of goods and services tax (GST) will be charged on net tax liability with effect from 1st September 2020*. However, the amendment is not in line with what was decided by the GST Council in its 39th meeting held in March. GST councils had decided to charge interest on net tax liability retrospectively w.e.f. 01st July 2017.
*The Finance Bill 2021 proposes to amend Section 50 of the Central Goods and Services Tax (CGST) Act to substitute the proviso to sub-section (1) so as to charge interest on net cash liability retrospectively with effect from the July 1, 2017.
CBIC assured taxpayers by press release that , even though prospective amendment of the proviso, no recoveries shall be made for the past period as well by the central and state tax administrations in accordance with the decision taken in the 39th Meeting of the GST Council. This will ensure full relief to taxpayers as decided by the GST Council.
Taxpayers who have paid interest during last three years on gross liability have to approach court to seek refund of excess paid interest. Refund of excess interest would be a tough task due to prospective amendment of the provision.
The proposal as per Finance Act 2021, Section 112 brought into force on 1st June, 2021 vide Notification No. 16/2021-Central Tax dated 1st June, 2021. This amendment brought great relief earlier tax authorities issued demand notices charging interest on the gross liability. This amendment ensures a fair calculation.
Interest Rates under GST:
| Nature of Delay | Relevant Section | Applicable Interest Rate |
|---|---|---|
| Delay in payment of tax (Net Tax Payable in Cash) | Section 50(1) | 18% per annum |
| Wrongful claim & utilization of ITC | Section 50(3) | 24% per annum |
