Demand raised for interest on short payment of tax

Scn time over tor section 73/74.for 18.19.

Interest is generally payable on the portion of the delayed tax that was discharged through the electronic cash ledger—not automatically on the gross liability. For FY 2018–19, the proviso to CGST Act section 50(1), inserted retrospectively with effect from 1 July 2017, limits interest on delayed return filing to the tax paid through cash, subject to the statutory exception for proceedings under section 73 or 74. Apply the cash/credit actually used to discharge the relevant liability; an unused credit-ledger balance does not, by itself, reduce interest. The liability’s nature and the manner and date of its later payment therefore matter.

• The department may issue an SCN for FY 2018–19 if it is within the applicable limitation period and statutory conditions. For section 73, the ordinary order deadline is three years from the due date of the annual return for the relevant year, with the SCN required at least three months before that deadline; section 74 has different periods and requires the specified fraud/suppression grounds. Extensions and the exact return/notice timeline must be checked before concluding that a notice is time-barred.
• Reconcile the short-paid tax, when it became due, later GSTR-3B payments, and cash-versus-credit utilisation. Also verify whether the proposed demand is under section 73 or 74, since this can affect the interest analysis.

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Interest demand on short payment for FY 2018-19 paid later:

• Interest under Sec 50 is payable on the delayed tax (only on the cash portion, if ITC was available, under the 50(1) proviso). If the department demands interest through a proper order within limitation (Sec 73 orders for FY 2018-19 were due by 31 August 2024 as extended), it's recoverable.

• If the demand comes now without an SCN, argue limitation, or check whether it's a recovery of self-assessed interest under 75(12) (courts are divided on whether interest needs an SCN).