Yes, as per the decision of the 39th GST Council Meeting held on March 14, 2020, interest on delayed payment of GST liability will be charged on the net cash tax liability from a retrospective effect, i.e., from July 1, 2017.
This means that interest will be levied only on the portion of the GST liability that is paid through cash, and not on the input tax credit claimed. The move was aimed at providing relief to taxpayers who were facing issues with the tax department due to the mismatch of input tax credit claimed and input tax credit available on the GST portal.
This retrospective amendment to the GST Act was made through the Finance Act, 2021, and the interest rate on delayed payment of GST liability was set at 18% per annum for the first 15 days of the delay, and 24% per annum thereafter.
The decision to charge interest only on the net cash tax liability was made in order to provide relief to taxpayers who were facing difficulties due to technical glitches on the GST portal, and were unable to claim input tax credit in a timely manner. Many taxpayers had faced issues due to the non-availability of the option to claim input tax credit on the GST portal when filing their returns.
The retrospective amendment to the GST Act was made in order to provide relief to taxpayers, and also to ensure that the interest rate charged is fair and reasonable. The decision to charge a higher rate of interest (24% per annum) for the period after the first 15 days of delay was made in order to incentivize taxpayers to pay their GST liability on time, and to discourage the practice of delaying payment of GST.
It is important to note that the interest charged on delayed payment of GST liability is not a penalty, but is simply the cost of delaying payment of tax. The interest charged is intended to compensate the government for the delay in receiving the tax revenue, and is calculated on a daily basis.
In order to avoid interest charges, it is important for taxpayers to pay their GST liability on time, and to ensure that the input tax credit claimed is matched with the input tax credit available on the GST portal. It is also important to maintain proper documentation and records in order to avoid any disputes or issues with the tax department.
GST interest is the interest charged on the delayed payment of GST (Goods and Services Tax) by a registered taxpayer. Under the GST laws, interest is levied on the delayed payment of GST at a specified rate. The rate of interest for delayed payment of GST is 18% per annum, calculated on the amount of outstanding tax liability.
Interest on GST is levied on the net tax liability, which is the difference between the output tax and input tax credit for a particular tax period. Interest is calculated from the due date of payment of tax to the date of actual payment of tax. Interest on GST is payable by the registered taxpayer and is not eligible for input tax credit.
The retrospective amendment related to GST interest is significant because it clarifies the manner in which interest is to be calculated and paid on the delayed payment of GST by a registered taxpayer. Prior to the amendment, interest was being levied on the entire tax liability, including the amount of tax paid through the utilization of input tax credit.
The retrospective amendment, which was made effective from July 1, 2017, clarified that interest would be levied only on the cash portion of the tax liability, which is the amount of tax paid by a registered taxpayer in cash. This means that interest will no longer be levied on the tax liability which is discharged through the utilization of input tax credit.
The significance of this retrospective amendment is that it provides relief to the registered taxpayers who had availed input tax credit for discharging their tax liability. Earlier, such taxpayers were also liable to pay interest on the tax liability which was already discharged through the utilization of input tax credit. With the retrospective amendment, the interest liability is restricted to the cash portion of the tax liability, which is a fairer and more equitable method of calculation.
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