Request to PM to stop collecting interest on Gross GST Liability

Guest | Last updated: 24 February 2020

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Businesses are expressing concern over the collection of interest on their gross GST liability, rather than the net amount. Despite an amendment to the CGST Act intended to clarify this, the CBIC has stated the change will be applied prospectively. This has led to confusion and hardship for taxpayers, prompting a letter to the Prime Minister requesting intervention to stop the collection of interest on gross amounts and to make the change retrospective.

The FM in the Union Budget 2020 announced to amend section 50 of the CGST Act and collect interest on the Net GST Liability. However, a few days ago CBIC issued a clarification that the interest will be collected on the effect of such amendment will be prospective and not retrospective that interest

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FAQ :

The primary concern is the collection of interest on the gross GST liability instead of the net GST liability, which taxpayers argue is unfair and complex.

The Union Budget 2020 announced an amendment to section 50 of the CGST Act to collect interest on the net GST liability.

The CBIC clarified that the amendment to collect interest on net GST liability will be applied prospectively, meaning interest will still be collected on gross GST liability from July 1, 2017, until the change is officially notified.

Taxpayers are requesting the Prime Minister to direct the department to stop collecting interest on gross GST liability and to make the intended change retrospective.

A proviso inserted into Section 50(1) of the CGST Act via the Finance Act 2019 supports the calculation of interest on the net tax amount paid via the electronic cash ledger, and the Madras High Court has also passed a balanced judgment supporting this.

If immediate action is not taken, there could be significant unrest among taxpayers, and some may be forced to close their businesses, leading to widespread unemployment.