The Petitioner had delayed in filing of some of their monthly GSTR-1 and GSTR-3B Returns. Therefore, the Petitioner remitted interest on such late filing of return on the net tax liability. However, the Respondent issued notices and demanded interest the gross tax liability. Aggrieved, the Petitioner preferred a Writ before the Bombay HC.
The Bombay HC observed that Section 50 of the CGST Act was introduced by Finance (No. 2) Act, 2019 for charging interest on the net cash tax liability. The said amendment was made effective prospectively from 01 September 2020, although the GST Council in its 39th meeting had recommended to make the said amendment effective retrospectively w.e.f. 01 July 2017. Accordingly, in order to implement the decision of the GST Council in its true spirit within the present legal framework, field formations had been instructed to recover interest only on the net cash tax liability for the period 01 July 2017 to 31 August 2018 and the keep those show cause notices in the call book till retrospective amendment in section 50 of the CGST is carried out.
In light of the above observations, the Bombay HC observed that no live issue survives for adjudication in the instant case as the question has already been answered by the Board. Accordingly, the Bombay HC quashed the notices issued by the Respondent.
KLT Automotive and Tubular Products Limited [W.P. No. 983 of 2020]
GLS Comments:
Although the GST Council had firstly recommended levy of interest on net cash liability back in its 31st Council Meeting held on 22 December 2018, the same has been effectuated only recently in September 2020. The Telangana HC in the case of Megha Engineering and Infrastructure Limited [2019 (26) G.S.T.L. 183] on 18 April 2019 had held that the interest would be applicable on gross liability as the recommendations of the GST Council was only on paper.
However, subsequently, the Madras HC in the case of Refex Industries Limited [Writ Petition Nos.23360 and 23361 of 2019] had held that the amendment to Section 50 of the CGST Act clearly seeks to correct an anomaly in the law and therefore, should be read as clarificatory and to operate retrospectively. Subsequently, the CBIC had also cleared the air by issuing Press Release dated 26 August 2020 wherein it had been provided that although the amendment to Section 50 of the CGST Act has been made effective prospectively in view of technical limitations, no recoveries shall be made for the past period. Acordingly, as things stand today, there is no anomaly regarding interest on delayed filing of GST Returns.
Disclaimer:
The information provided in this update is intended for informational purposes only and does not constitute legal opinion or advice. Readers are requested to seek formal legal advice prior to acting upon any of the information provided herein. This update is not intended to address the circumstances of any particular individual or corporate body. There can be no assurance that the judicial/ quasi judicial authorities may not take a position contrary to the views mentioned hereinrra quis.
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