GST Update No 335 on Electronic cash ledger is merely an E-wallet

The issue as regards to making deposit in electronic cash ledger and treating the same as depositing in Government’s wallet has been a matter of discussion and dispute since long. The tussle between the department and assessee in this respect keeps on increasing the miseries of businessman as revenue authorities demand interest even if the amount is deposited by the assessee in electronic cash ledger but GSTR-3B has not been filed. Recently, same issue was raised in front of hon’ble Jharkhand High Court in the case of RSB TRANSMISSIONS (INDIA) LIMITED V/S UNION OF INDIA. The decision imparted in this case is subject matter of discussion of our present update.

The present petition is filed wherein a question is raised as to whether under the provisions of GST Act, the amount deposited as tax through valid challans in the electronic cash ledger prior to filing GSTR-3B could be treated as discharge of tax liability in respect of which GSTR-3B is filed belatedly and whether interest on the same under Section 50 of the CGST Act, 2017 is to be levied.

In the present case, interest of Rs. 13,23,783/- is levied due to delay filing of GSTR-3B for July 2017 to Dec 2019. The petitioner denied the liability to pay interest on delay in filing of GSTR-3B on the grounds that tax is already deposited prior to filing of GSTR-3B in Electronic Cash Ledger. It was further argued that interest could be leviable only on that part of tax which is deposited in the electronic cash ledger after due date of GSTR-3B. Out of total interest of Rs. 13,23,783/-, interest of Rs. 11,70,523/- was only to be paid as per the petitioner. It was further contended that no interest could be levied on tax, which was deposited prior to the due date of payment of tax, that is prior to the due date of filing of GSTR -3B. It was also prayed to interpret the provisions of Section 50 (1) of the CGST Act 2017 as if interest is not leviable on the portion of tax already deposited prior to the due date of filing of GSTR 3B return. Hence, it was requested to refund the amount of Rs. 11,70,523/- collected as interest as per Section 50 of the Act.

The petitioner referred to various provisions of the CGST Act, 2017 and argued that when an amount is deposited towards tax in the Government bank account and reflected in the Electronic Cash Ledger, upon filing of GSTR 3B return, it is merely shown as debited from the Electronic Cash Ledger. There is no real movement or transfer of money from the petitioner's end as the amount is already in the Government exchequer. Further, interest can be levied only on that part of tax which has been deposited later than due date/ last date of filing GSTR-3B. Therefore, as the ledger is debited only at the time of filing GSTR-3B, interest on entire amount of tax paid in cash cannot be levied because amount lies with the Government exchequer prior to filing of GSTR-3B. The debit entry is only a fictional entry. Since the ITC is also deemed to be as good as tax paid there is no difference between electronic cash and credit ledger. Reference in this regard can be made on the following cases:
•   PRANNOY ROY & ANOTHER V/S COMMISSIONER OF INCOME TAX AND ANOTHER [2001 SCC ONLINE DEL 1362 (PARA 9)]
•   MAGADH SUGAR & ENERGY LTD V/S STATE OF BIHAR AND OTHERS [2021 SCC ONLINE SC 801 PARA-28, 29 AND 31]
•   DWARKA PRASAD V/S DWARKA DAS SARAF [(1976) 1 SCC 128 PARA-17 AND 18]
•   PRATIBHA PROCESSORS AND OTHERS V/S UNION OF INDIA AND OTHERS [(1996) 11 SCC 101 PARA 13]
•   J.K. SYNTHETICS LIMITED V/S COMMERCIAL TAXES OFFICER [(1994) 4 SCC 276 PARA 10]
•   GRASIM INDUSTRIES LTD V/S COLLECTOR OF CUSTOMS, BOMBAY [(2002) 4 SCC 297 PARA 10]

The Counsel of revenue referred to various provisions of CGST Act, 2017. It was submitted that the present case is distinguished from the decision of Gujarat High Court in the case of M/s Vishnu Aroma Pouching Private Limited since in the present case neither were any technical glitches in filing GSTR 3B return for the concerned periods in GSTIN Portal, nor any intimation was given to the jurisdictional officer and GSTIN help desk in timely manner. Also, the deposits made by challans are reflected in Electronic Cash Ledger and stays in that cash ledger till GSTR-3B is filed. Only then the cash ledger stands debited and amount is deposited in Government’s account. It was argued that the interest under section 50 of CGST Act, 2017 shall be calculated on the basis of net tax liability i.e on the portion which is paid through cash. Furthermore, the cash amount of Rs. 29,83,86,479/- deposited prior to due date and Rs. 2,32,77,535/- deposited after the due date for filing of GSTR-3B return by the petitioner remained in taxpayer's Electronic Cash Ledger and only after filing the GSTR-3B returns, these cash amounts credited in Electronic Cash Ledger of the petitioner got debited to Government coffers. Thus, set off of tax amount after due date of filing return attracted levy of interest.

A rejoinder was submitted by the petitioner stating that GSTR-3B cannot be furnished unless full payment of tax is made by the taxpayer. Therefore, if the contentions of respondent are accepted then the proviso of Section 50 of CGST Act, 2017 would be rendered otiose.

The Court referred to various provisions of CGST Act, 2017 and a combined reading of the same shows that the deposit does not means that the amount is appropriated towards Government Exchequer. Further, as per Section 49 of the Act, the date of credit in Government’s account shall be deemed to be date of deposit in the electronic cash ledger. Further, no person can make payment of tax prior to filing of GSTR-3B and the deposits lying in cash ledger can be discharged only on filing GSTR-3B failing which does not amount to payment of tax due to its State Exchequer. Further, Section 50 of CGST Act, 2017 also mentions that interest shall be levied on portion of tax which is paid by debiting cash ledger. Therefore, discharge of tax liability is simultaneous to filing GSTR-3B. If contentions of petitioner are accepted, it would be against the scheme of GST Act and would make GST regime unworkable. Further, there is no time period for depositing amount in cash ledger since it is merely an e-wallet wherein cash can be deposited using challans which can be claimed as refund by the taxpayer at any point of time. Therefore, cash is just in nature of deposit and ITC is available in favour of assessee on account of tax already paid. The decision of Delhi High Court in the case of Prannoy Roy cannot be relied upon. Therefore, any deposit prior to filing of GSTR-3B in cash ledger does not results in discharge of tax liability. Therefore, the claim for refund was rejected and the writ petition was dismissed.

The above decision is a setback for the assessees as it seeks to confirm the contention of the department that deposit in electronic cash ledger does not absolves assessee from interest liability for delay in filing GSTR-3B for the reason that the amount is actually available to the government on offsetting while filing GSTR-3B return. On the contrary, the amount in electronic credit ledger is an earned tax credit which is already available with the government so interest cannot be imposed on the portion of amount appearing in the electronic credit ledger. It seems that now the assessee needs to be cautious to file GSTR-3B returns in timely manner so that interest liability may be avoided.

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GST Update No 335 on Electronic cash ledger is merely an E-wallet

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