GST Update No 280 on interest levied on cash/credit component if no GST payment is made

The discussion and litigations as regards to applicability of interest on cash or credit component available in the electronic ledger wherein no GST payment is made are never ending. The tug of war between the department and taxpayers remains intact wherein the departmental authorities demanded interest on amount available in electronic cash ledger and taxpayers are stubborn to not to pay any interest. However, this issue reached its conclusion when it was reported before Madras High Court in the case of India Yamaha Motor Private Limited V/s The Assistant Commissioner. The decision imparted in this case is subject matter of our present update.
The petitioner has challenged the Order dated 10.04.2019 wherein it was alleged that interest of Rs. 5,00,00,000/- is liable to be paid by assessee on account of belated payment of GST for the period from July 2017 to Oct 2017. The matter was heard and it was directed to the respondent to hear the matter and then pass the order. The petitioner submitted that while filing return for the month of July, 2017, error was discovered and hence, the return was only “filed” and not “submitted”. The petitioner argued that the output tax liability was remitted in full into cash ledger even prior to filing of “return”. Although, efforts were made by petitioner to correct the error, but nothing happened. It was submitted that cascading effect of the aforesaid events have led to the subsequent monthly returns being delayed as well. Therefore, proper determination of output tax liability could not be made.
The petitioner was allowed to make additional submissions and similarly, respondent made additional counter.It was submitted that levy of interest under Section 50 of CGST Act, 2017 arises from the fact that while filing GSTR-3B for the month of July 2017, inadvertent error occurred wherein data pertaining to its plant at Faridabad was included instead of data pertaining to the Chennai plant. As a result, there was short declaration of output tax liability for the period from July 2017 to Oct 2017. A grievance was also filed by the petitioner seeking modification of the return for the month of July 2017 which was not addressed by the authorities. Hence, no returns were filed further for the period from Aug to Oct 2017. It was argued that if sufficient balance of input tax credit is available inelectronic credit ledger as well as cash ledger, there is no loss of revenue to the Government’s Exchequer since interest is only compensatory in nature. The interest under Section 50 was recomputed taking into consideration the amendment. It was argued that the same acceptance as made by GST authorities in relation to cash balance should be available for credit as well. Reference was drawn to the decision of this Court in the case of Refex Industries Limited V/s The Assistant Commissioner of CGST and Central Excise. It was concluded that the proviso should not operate retrospectively and therefore, if assessee had sufficient cashcredit, no question can be raised by department related to compensation. Reliance was placed on decision of Apex Court in the case of Union of India V/s Bharti Airtel Limited & Ors. Further various cases were also cited i.e. Eicher Motors Ltd. And Another Vs. Union of India and Others, [(1999) 2 SCC 361], Commissioner of C.Ex., S.T. & Cus., Cochin Vs. Fact Ltd., [(2017) 355 ELT 55], N.C.Mukherjee and Co. V.s Union of India and Another, [68 ITR 500], Vijaya oil Mills Vs. State of Kerala, [(1979( Tax. L.R. 1799] and Mahant Bhagwan Bhagar Vs. G.N.Bhagat and Others, [(1972) 1 SCC 486].The Court stated that the credit cannot be quoted with the cash remittances since it is not necessary in all the circumstances that the resources back up the credit and are within the reach of the department. Reference was made to the reasoning of the impugned order wherein it was stated that under GST Act, having sufficient balance of input tax credit in electronic credit ledger is immaterial unless the return is filed and same is debited towards payment of GST. Therefore, the tax is paid only when the returns are filed and the ledgers are debited towards the tax liability. Further, the payment iscredited to the Government’s accountonly when return is filed. Hence, mere generation of e-challan is inconsequential. The date of debit of tax payable is the date of payment of tax. Reliance was placed on decision of Telangana High Court in the case of M/s.Megha Engineering & Infrastructures Ltd. Therefore, the contentions of petitioner were rejected and liability was re-computed and interest was levied from the 26th day of August, 2017 till the date of debit in the electronic cash ledger on filing of Return. Further, if the stand of petitioner is concerned, then an assessee would be protected from levy of interest which is impermissible. There are various situations wherein credit may be found to have been availederroneously or on a mistaken interpretation of law. Hence, it would result into loss of revenue in case it is agreed that mere availability of electronic credit should be assumed to be utilization. Thus, unless return is filed, same cannot be assumed to be set-off against the tax liability. It was further stated that the reliance placed on by the assessee on the decisions of Apex Court and other Courts are not correct since the same are not applicable in the present case. Reference was drawn to the decision of Nagpur Bench of the Bombay High Court, in the case of MahavirManakchand Bhansali Vs Commissioner of Income Tax regarding interpretation issues of law. It was therefore, held that writ petition is partly allowed.The above decision is a setback for trade and industry wherein both cash ledger and credit ledger are put under same tax brackets. However, subsequently in the 31st GST Council Meeting and further amendment under Section 50 of CGST Act, 2017 vide Finance Bill, 2019 interest will be charged only on that portion on which GST liability will be paid by debiting electronic cash ledger. This will certainly provide relief to various taxpayers.However, every taxpayer is thinking as to why there is difference between credit ledger and cash ledger? We all know that there are number of glitches in online portal and many times it does not allow to file the returns. In that time, the assessee pays the tax amount but failed to file return. This cash payment cannot be utilised for any other purpose except tax payment. Hence, the liberal view should be taken and interest should not be charged. We have also came across similar situation in July 2017 where tax payer took the credit of one crore instead of 10 lakh in GSTR-3B.We approached the tax authority but he advised us that GSTR-3B is temporary return and you should rectify this mistake in GSTR-3. He keep on filing 3B return as well as cash payment coming in the return. But portal adjusted the credit balance but cash balance was lying in electronic cash ledger. Later on, it was told that GSTR-3B is final return. Thereafter, taxpayer reversed the amount and department demanded the interest. It was pleaded that there was no loss to exchequer but the interest demand is being issued to taxpayer .In such a situation, many of us are failed to understand this concept of not charging interest when credit balance is availablebut the interest has to be paid although cash balance is lying in ledger.

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GST Update No 280 on interest levied on cash/credit component if no GST payment is made

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