Gujarat HC serves notice on Centre over interest on delayed payments

The Gujarat High Court (HC) has served notices on the Union government, the Goods & Services Tax (GST) Council, and the Central Board of Indirect Taxes and Customs over the issue of charging interest on delayed payment of taxes under GST. 

Earlier, the GST Council had decided that interest up to 18 per cent would be levied only on delayed payment through cash ledger and not via input tax credit. Simply put, interest would be levied on a net basis, not gross.  The government notified this decision later. It also introduced certain exemptions. For instance, cases under investigation would not allowed this benefit and interest would be levied on a gross basis after September of the following year, said Abhishek Rastogi, partner at Khaitan & Co. Aggrieved, a company filed a petition in the Gujarat HC, praying these exceptions be made ultra vires.  

The petition stated that the exceptions by the government violated the GST Council’s decision. "The GST Council thought it fit to recommend to the government to levy interest only on net cash liability, irrespective of classification of taxpayers.

Such a mandate from the GST Council could not have been overlooked or restrictive," read the petition. 

Rastogi said the input tax credit was the taxpayer’s money and interest could not be levied on it for delayed payment. He said if the taxpayer wanted to revise his returns after September of the following year, he should be allowed to do so, without drawing interest on delayed payments made from the input tax credit.

He said even if investigation was on under GST provisions, interest could not be levied on a portion paid via credit utilisation.