Confirmation of Interest Liability Without Initiating Adjudicating ProceedingValidityV.N. Damodar

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The Tax Publishers GST--Adjudication Confirmation of Interest Liability Without Initiating Adjudicating Proceeding--Validity V.N. Damodar The learned author aims at discussing the provisions regarding levy of interest under section 50 read with section 73 of the Central Goods and Services Tax Act, 2017 so as to determine the issue as to whether interest liability under section 50 can be confirmed without initiating the adjudication proceeding under section 73. 1. Introduction Section 50 of the Central Goods and Services Tax Act, 2017 (in short "the CGST Act") deals with interest on delayed payment of tax. As per sub-section (1) of section 50 of the CGST Act, every person who is liable to pay tax in accordance with the provisions of this Act or the rules made thereunder, 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. As per proviso to sub-section (1) of section 50, the interest on tax payable in respect of suppliers made during a tax period and declared in the return for the said period furnished after the due date in accordance with the provisions of section 39, except where such return is furnished after commencement of any proceedings under section 73 or section 74 in respect of the said period, shall be levied on that portion of the tax that is paid by debiting the electronic cash ledger. As per sub-section (2) of section 50, the interest under sub-section (1) shall be calculated, in such manner as may be prescribed, from the day succeeding the day on which such tax was due to be paid. Sub-section (3) of section 50 provides that a taxable person who makes an undue or excess claim of input tax credit under sub-section (10) of section 42 or undue or excess reduction in output tax liability under subsection (10) of section 43, shall pay interest on such undue or excess claim or on such undue or excess reduction, as the case may be, at such rate not exceeding twenty-four per cent, as may be notified by the Government on the recommendations of the Council. Now we come to provisions of section 73 dealing with determination of tax not paid or short-paid or erroneously refunded or input tax credit wrongly availed or utilized for any reason other than fraud or any willful misstatement or suppression of facts. Sub-section (1) of section 73 provides that where it appears to the proper officer that any tax has not been paid or short paid or erroneously refunded, or where input tax credit has been wrongly availed or utilized for any reason, other than the reason of fraud or any willful misstatement or suppression of facts to evade tax, he shall serve notice on the person chargeable with tax which has not been so paid or which has been so short paid or to whom the refund has erroneously been made, or who has wrongly availed or utilized input tax credit, requiring him to show cause as to why he should not pay the amount specified in the notice along with interest payable thereon under section 50 and a penalty leviable under the provisions of this Act or the rules made thereunder. As per sub-section (2) of section 73, the proper officer shall issue the notice under sub-section (1) at least three months prior to the time limit specified in sub-section (10) for issuance of order. SUBSCRIBE FOR FULL CONTENT

The Tax Publishers

GST--Adjudication

Confirmation of Interest Liability Without Initiating Adjudicating Proceeding--Validity

V.N. Damodar

The learned author aims at discussing the provisions regarding levy of interest under section 50 read with section 73 of the Central Goods and Services Tax Act, 2017 so as to determine the issue as to whether interest liability under section 50 can be confirmed without initiating the adjudication proceeding under section 73.

1. Introduction

Section 50 of the Central Goods and Services Tax Act, 2017 (in short "the CGST Act") deals with interest on delayed payment of tax. As per sub-section (1) of section 50 of the CGST Act, every person who is liable to pay tax in accordance with the provisions of this Act or the rules made thereunder, 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.

As per proviso to sub-section (1) of section 50, the interest on tax payable in respect of suppliers made during a tax period and declared in the return for the said period furnished after the due date in accordance with the provisions of section 39, except where such return is furnished after commencement of any proceedings under section 73 or section 74 in respect of the said period, shall be levied on that portion of the tax that is paid by debiting the electronic cash ledger.

As per sub-section (2) of section 50, the interest under sub-section (1) shall be calculated, in such manner as may be prescribed, from the day succeeding the day on which such tax was due to be paid.

Sub-section (3) of section 50 provides that a taxable person who makes an undue or excess claim of input tax credit under sub-section (10) of section 42 or undue or excess reduction in output tax liability under subsection (10) of section 43, shall pay interest on such undue or excess claim or on such undue or excess reduction, as the case may be, at such rate not exceeding twenty-four per cent, as may be notified by the Government on the recommendations of the Council.

Now we come to provisions of section 73 dealing with determination of tax not paid or short-paid or erroneously refunded or input tax credit wrongly availed or utilized for any reason other than fraud or any willful misstatement or suppression of facts.

Sub-section (1) of section 73 provides that where it appears to the proper officer that any tax has not been paid or short paid or erroneously refunded, or where input tax credit has been wrongly availed or utilized for any reason, other than the reason of fraud or any willful misstatement or suppression of facts to evade tax, he shall serve notice on the person chargeable with tax which has not been so paid or which has been so short paid or to whom the refund has erroneously been made, or who has wrongly availed or utilized input tax credit, requiring him to show cause as to why he should not pay the amount specified in the notice along with interest payable thereon under section 50 and a penalty leviable under the provisions of this Act or the rules made thereunder.

As per sub-section (2) of section 73, the proper officer shall issue the notice under sub-section (1) at least three months prior to the time limit specified in sub-section (10) for issuance of order.