Every legislature which contain the provisions for collection of taxes, duty or other amount also contains the provisions for interest on late payment or non-payment of such amount.
Just like other legislatures, GST Act also contains the provision for levy of interest on delay or non-payment of GST. However, quantum of interest to be levied is under dispute from first day of introduction of GST in India. Dispute is whether GST will be charged before adjusting ITC (on Gross Liability) or after adjusting ITC (Net Liability).
To resolve the above issue , amendment was carried out in Section 50 of CGST through Finance (No. 2), Act 2019. Section 100 of said Finance Act provides for amendment in section 50 of CGST Act, 2017 and introduced proviso to section 50 which provides that interest shall be charged on that portion of tax that is paid by debiting the electronic cash ledger. However, notification for enforcing the above amendment was not issued due to which the proviso to Section 50 was not effective.
This much awaited Notification for enforcing the provisions of Section 100 of Finance (No. 2) Act, 2019 has now been issued vide Notification No. 63/ 2020-Central Tax dated 25.08.2020. The provision of Finance Act as per Notification will be effective from 1st September, 2020.
It needs to deliberated what would be the status of levy of interest in respect of earlier period as the relief granted is prospective in nature w.e.f. 01.09.2020 and not retrospective w.e.f. 01.07.2020, despite the fact that as per Press Release dated 14.03.2020 it was intimated that GST Council has decided in its 39th Meeting that amendment will be carried out in GST Laws retrospectively.
For further deliberations please refer to article titled “Interest on net GST liability: Analysis of why relief is granted prospectively, in backdrop of events so far”
For ready reference of our readers the Notification can be read as under:
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Frah Saeed is a law graduate specializing in the core field of indirect taxes and is the Co-founder of taxwallah.com. She has authored many publications on GST and is into full-time consultancy on GST to big corporates. She as a part of taxwallah.com heads a team comprising of Chartered Accountants and Advocates and plays a key role in our mission to disseminate GST knowledge to all.
I think it is not restrospectiv amendment