The Union Budget 2019 has furnished relief to GST-enrolled taxpayers with many new updates. One such correction identifies with the interest on the delayed payment of GST liability. This is a major relief for taxpayers as until this correction was passed, interest has consistently been charged on the whole measure of tax paid after the due date.
The present rate of interest on the late payment of tax liability is 18% per annum on unpaid GST. Such interest rate is charged on all methods of payment of tax, also when actual money has not been paid, however input tax credit(ITC) has been utilized instead. This arrangement is harsh if the taxpayer had ITC to set off a tax liability. ITC credit emerges when tax has been paid to the government and credit is eligible. A basic fact that input buys by a business are made well before the final items are available for sale and if the tax on these sales has been represented and paid, credit on buys must be available. Subsequently, charging interest rate on the whole amount, including such segment paid by using input tax credit, appeared to be unrealistic and unreasonable.
Two months prior, a writ petition was filed in the Telangana High Court, testing the levy of interest on the gross measure of tax payable. The petitioner bid against interest rate being charged on the input tax credit bit of the tax due, as the GST portal do not enable a return to be filed except if the liability due in real money has also been paid. While specialists were giving opinion that this rule by the Government is against its targets and built up practices, the Law did not explain the degree of obligation interest rate ought to be imposed on. Henceforth, an order was passed approving the interest rate charge by the tax experts, and in this way cancelling the writ petition.
The 31st GST Council meeting suggested changing this Law to give that only the net liability of a taxpayer would from this point onward be subjected to interest. This alteration to the Central Goods and Services Tax Act (GST), was presented under the Finance Bill, 2019. Under this new alteration governing section 50 of the Act, interest rate will currently be charged on just that segment of the GST liability which is paid by charging the electronic cash ledger. The part paid using money, getting much wanted relief to taxpayers.
The correction to section 50 was proposed in the Union Budget on the July 5, 2019, and the Finance Bill 2019 was passed in the Lok Sabha on the July 18, 2019. For taxpayers who have effectively paid interest rate on the full tax liability in the current financial year, including that bit paid utilizing credit, the official notification, once published, will give clear picture on whether they are qualified for a refund.
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