Interest under GST| Section 50 Amendment| GST council meeting update

Описание: India GST is turning 5 years very very soon. We are what 60 days from GST celebrating Happy Birthday. In these 5 years, if I could pick one area, one aspect that has been a matter of intense and extensive debate, deliberation, discussion is Interest under Section 50.
Back in 2020 when interest on delayed payment of tax took the forefront of discussion, we did a video explaining the changes and that’s linked up here. Please do watch.
After 2.5 years, interest topic is back in limelight. What happened now? What happened then? Why are we talking about interest again? Lets quickly get started and dive into the gamut of changes.
Lets first get the basics out of the way.
1. Section 50 of the CGST Act, 2017 speaks of Interest payable.
2. How much?
Depends on what error has occurred?
3. Have you delayed filing your return or have you availed excess ITC or have you defaulted in tax payment? It varies from case to case, instance to instance.
Case -I
A. There has occurred a delay in filing of GST return.
So, GSTR-3B return of tax payment is due to be filed by 20th of every month. So by 20th every registered person is expected to pay tax. But what if the return could not be filed on time. What if there has occurred a delay in return filing by a couple of days.
Well, this aspect (Sighs Thankfully!!) is all settled now.
Interest is payable at 18% per anum on NET GST liability payable in cash and cash only. This is long settled now. Nah nah Nah. No more questions entertained!!! You want to know more – watch this video.
Case -II
A. Return has been filed on time but one invoice was missed in reporting.
Now this is where things get little tricky. Lets admit, sometimes, there do arise instances where 1-2 invoices get missed in reporting. May be it is identified immediately or in year end reconciliation. But the underground fact is Invoice has been missed. Not reported Not paid.
So should I pay interest on this transaction?
Well, the answer is Yes. Interest is payable 18% on the GST liability that has been missed.
Should I still pay interest even if the GST liability has been paid by utilizing input tax credit? Well, in this case, Yes. Even though the missed GST liability has been discharged at a later point of time using accumulated ITC, there is a need to pay interest because what has happened is not delayed filing of a return, rather it is delayed payment of tax. Missed payment of tax. Tax has not been paid on an invoice even though the return was filed. So interest is still liable to be paid on this missed invoice GST liability even though the same has been paid using input tax credit. Interest rate is 18%.
Case -III
B. Excess availment of input tax credit
Now this is our core area of discussion. Upto Finance Act 2022, there was a lot of debate on how much interest is to be paid when ITC has been availed in excess? 18% or 24%.
What happens when ITC has been availed but not utilized. Means, such excess / undue ITC inadvertently claimed by you is still sitting in your Electronic Credit Ledger on the GST portal.
Finance Act, 2022 comes to this rescue. Amendment has been proposed in Sec 50 (Sighs YET ONCE AGAIN!!!).
Now interest for undue / excess claim of ITC by a registered person is liable to be paid only if the same has been utilized. That is the ITC has been knocked off towards paying liability arising on sales.
Now that’s a Happy news. That’s wonderful. Because, these 5 years of GST there has occurred numerous instances where assesses have inadvertently availed excess ITC, claimed wrong credits etc etc but were strained to no end to cough it up with interest as high as 24%.
Well well well. NOT ANY MORE. With the amendment in Section 50, tax payers can now heave a sigh of relief. Interest is not liable to be paid if there is only availment of ITC without utilization. So if you have availed any excess ITC and not utilized it. Reversing it would trigger 0 interest.
However, if you committed a bigger mistake. That’s availing wrong credit and utilizing it as well. Then folks, there is no shying away from paying interest. But again the same is reduced to 18%. So lets say you do have to pay interest coz you not only availed wrong credits but also used it off, then the interest rate is 18% only.
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