Tax authorities to levy interest on cash, ITC component of GST paid after due date

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Officials to conduct due verification of all cases of late filing of returns

Tax authorities have made it clear that interest will be levied on both cash and input tax credit (ITC) component of GST paid after the prescribed due date.

Although the standing order has been issued by the Principal Commissioner of Hyderabad GST Commissionerate, experts say the same will be applicable for all the regions as it draws inference from C-GST (Central Goods & Services Tax)/S-GST (State Goods & Services Tax) Act. The order also made it clear that recovery of such interest will be recoverable arrears.

It has also asked the officials to conduct due verification of all the cases of late filing of returns (which obviously involve payment of self-assessed tax after the prescribed due date) and ensure that the interest liability is paid not only on the cash component, but also on the credit component.

The order also says that in case the interest was not discharged by any taxpayer, the concerned officer(s) should initiate prompt action for recovery of the same. It also states that a register will be maintained, in the divisions, in order to keep track of the cases and will be updated on a regular basis with proper abstract; and the unpaid interest amount shall be pursued for recovery by treating the same as recoverable arrears.

The order has recorded some irregularities like interest liability not being discharged by some tax payers. It is possible that some taxpayers are discharging such interest liability, either at the instance of the officers of the department or on their own as convenient to them, while filing subsequent returns. It is also possible that some taxpayers are paying such interest only on the cash component of the tax, but not on the ITC component.

On priority

“These irregularities are against the provisions of the GST law and need to be addressed on priority. In fact, the delay in payment of interest is a clear case of financial accommodation; and is absolutely against the interest of the revenue,” the order read while calling for prompt action to recover interest.

The law says, “Every person who is liable to pay tax in accordance with the provisions of this Act or the rules made there under, but fails to pay the tax or any part thereof to the government within the period prescribed, shall, for the period for which the tax or any part thereof remains unpaid, pay, on his own, interest at such rate, not exceeding eighteen per cent., as may be notified by the government on the recommendations of the Council.” The provision is the base of this order.

Augmenting revenue

Commenting on the order, Anita Rastogi, Indirect Tax Partner at PwC, said in order to ensure revenue augmentation, the government is focusing on available data to figure out areas where the tax payers have short paid. “Interesting they have noticed evasion of interest and that will be an area of further investigation,” she said.

Source: https://www.thehindubusinessline.com/economy/policy/tax-authorities-to-levy-interest-on-cash-itc-component-of-gst-paid-after-due-date/article26205931.ece

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