GST Dept to initiate Recovery Proceedings against Interest Defaulters [Read Order]

The Central GST Department has decided to take measures to recover interest amount from the defaulters under section 50 of the Central Goods and Services Tax Act, 2017 including recovery of properties etc.

A standing order passed by the Hyderabad Commissionerate has pointed out a number of irregularities namely in connection with the non-payment of interest for delay in payment of self-assessed tax in every case of the delayed filing of GST-return.

It was said 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 return; and some are paying such interest only on the cash component of the Tax paid/being paid belatedly, but not on the ITC component of the Tax paid/being paid, for the delayed returns.

“The above 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. Hence, prompt action for recovery of interest, as per the law, is warranted,” the order said.

The order further said that since ITC/Credit in balance in the ‘Electronic Credit Ledger’ cannot be treated as the Tax paid, unless it is debited in the said credit ledger while filing the return for off-setting the amount in the ‘Liability Ledger’, the interest liability under Section 50 is mandatorily attracted on the entire Tax remained unpaid beyond the due date prescribed. The ITC in the balance as on the due date for filing the return has no relevance with regard to the interest liability u/Sec.50. It is immaterial whether the self-assessed tax is paid through the Credit/ITC or the Cash. Once the payment is beyond the prescribed date, interest liability is attracted to the entire Tax amount.

“It is pertinent to mention that the amount of the interest payable in terms of the Sec. 50, would automatically become a recoverable arrear, which needs to be recovered in terms of the Sec. 79 of CGSTA/SGSTA,” the Order said.

In view of the above observations, the Order given certain instructions to the officers including conducting due verification of all the cases of belated filing of returns, to initiate recovery proceedings in case of default in interest payment and to maintain a register in order to keep track of the cases which shall be updated on regular basis with proper abstract.