Question ID :
44790
Section 50(1) vs Rule 88B(2)
Taxpayer has missed out two invoices in GSTR 1 and GSTR 3B for the FY 2021-22 but reported in GSTR 9 and paid the taxes and interest on net liability. (ITC was maintained from due date till the payment at the time of GSTR 9). But the officer issued SCN to pay interest on entire taxes i.e., interest should be paid on gross liability as per Rule 88B(2) as the taxpayer did not reported in GSTR 1 and 3B.
Any supporting inputs to pay interest on cash portion only?
Thanks in advance
Posted by
CA. MADAGALA VENKATA RAMANA
on
Feb 04, 2025
Filed Under
GST
You can support your argument to pay interest only on the cash portion based on Rule 88B(1) of the CGST Rules, 2017, which states:
Interest is payable only on tax paid through the electronic cash ledger – If a registered person files their GSTR-3B belatedly, interest is applicable only on the portion of tax paid in cash and not on the ITC utilized, except when proceedings under Section 73 or 74 have been initiated?.
Rule 88B(2) applies only in cases where the tax remains unpaid – If tax is already paid voluntarily, interest should not be calculated on the gross liability but only on the net cash liability?.
Judicial Precedents and Circulars – There have been multiple interpretations supporting the view that interest should not be charged on the ITC portion since ITC is merely an accounting adjustment, and there is no actual delay in cash outflow?.
Since the taxpayer has already paid the tax and interest while filing GSTR-9, and no proceedings under Sections 73 or 74 were initiated, interest should logically be computed only on the net liability paid in cash. You can challenge the SCN by citing Rule 88B(1) and relevant clarifications from ICAI’s Background Material on GST.
Posted by
CA. JHA SHANKAR KUMAR on
Feb 11, 2025