Failure to file GST return in time means interest on entire gross tax liability: Telangana HC
New Delhi, May 9 (KNN) In a recent judgement, the Telangana High Court has ruled that in case of late GST returns filling, the liability to pay interest accrues on Gross tax liability.
The ruling comes after the Telangana High Court rejected a writ challenging imposition of interest on total goods and services tax liability including input tax credit.
This means that tax authorities will be able to levy interest on the gross tax liability of an assesse if there is any delay in tax payment.
The petitioner M/S. Megha Engineering and Infrastructures Ltd, the company that makes MS Pipes and executes various infrastructure projects. The company claimed to file their GST returns properly but had delayed in filing the returns in Form GSTR 3B for the period between October 2017 to May 2018.
They had paid the tax liability along with interest calculated on net tax liability while filing their returns.
The petitioner claimed that the delay in filing returns was not huge. The delay for the months October 2017, November 2017, February 2018 and May 2018 was just by one day.
The revenue had issued a claim letter that the interest is calculated on total tax liability or the gross tax liability.
In response to this demand, M/S. Megha Engineering and Infrastructures Ltd. filed a Writ petition in the Telangana High court.
After considering all the various provisions under the GST law, the court dismissed the writ petition and ruled that the company has to pay interest on the gross tax liability.
The Court said that until a return is filed as self-assessed, no entitlement to credit and no actual entry of credit in the electronic credit ledger takes place. It is only after a claim is made in the return that the same gets credited in the electronic credit ledger.
Once payment is made from such electronic credit ledger, the Government gets a right over the money available in the ledger.
Since as ownership of such money is with the taxpayer till the time of actual payment, the Government is entitled to interest upto the date of their entitlement to appropriate it, it said.
It said “The petitioner did file the return but belatedly. So the payment for the tax liability was made after the prescribed period. As a result, the liability to pay interest arose automatically. Thus, the petitioner cannot escape from this liability. Even though a couple of times, it was just by a day, the interest needs to be paid.”