Interest on belated GST liability payments- Shall be payable only on “cash liabilities”

One of the most awaited notifications related to levy of interest on belated GST liability payments, has been notified. Accordingly, interest shall be levied on that portion of GST liability which is deposited to Govt. after the due date and has been deposited in “cash”. Hence, no interest shall be levied on GST liability paid through GST credits.

Effective date of this is 01.09.2020

Situations, where interest shall be still levied on Gross liability (i.e. liability paid through cash and GST credits both)

  1. Liability for a month, which is reported in subsequent months Form GSTR-3B and
  2. GSTR-3B filed for a tax period after commencement of proceedings under section 73 & 74 for said tax period.

Our comments:

  1. Mere deposition of cash into electronic cash ledger shall not be deemed to be the payment of tax.
  2. Notification is effective from 01.09.2020. Hence, it should be applicable for tax periods whose tax payments are due on or after said date.
  3. It should not be applicable in cases where due dates were on or before 01.09.2020 but Form GSTR-3B has been furnished after said date.

Source: GOI egazette-Ministry of Finance