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Disallowance of GST late fee

Rohika PS (student) (263 Points)

10 September 2019

While computing PGBP income will GST late filing fees will attract disallowance under which section or it will be allowed as deduction??????

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8 Replies

Pranav Aggarwal (469 Points)
Replied 10 September 2019

disallaowed since it is rype of penalty.

and penalty under any law or any amount paid for breach of law is not deductible while calculation of PGBP

tushar tervankar (15 Points)
Replied 10 September 2019

Any paid Amount of Rcm under gst regim can I expense out in Profile and loss , and this exp will allowable as deduction or not ?

HEMANTH RANKA (Tax & Financial Consultants) (360 Points)
Replied 10 September 2019

I have a different opinion on the matter since it is late filing fees and is paid due to delay in filing of returns it is not a penalty paid for violation of any law and hence it is an allowable expense in my opinion.

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HEMANTH RANKA (Tax & Financial Consultants) (360 Points)
Replied 10 September 2019

If you are not claiming ITC on the GST paid under RCM and you are charging it to profit and loss account it can be claimed as an expense.

SEEMA SHAH (ARTICLE) (10 Points)
Replied 10 September 2019

agreed late fees are not penalty

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RAJA P M ("Do the Right Thing...!!!") (127542 Points)
Replied 10 September 2019

@ Rohika PS.,

GST Late Fee is allowed as expenditure under PGPB.

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Suresh Thiyagarajan (Student) (3986 Points)
Replied 11 September 2019

1. First, let us examine the nature of expenses which are disallowed under sec 37. If the payment is in the nature of infraction of law then it will not be allowed as deduction. The penalty is an example for infraction of law and thus it will not be allowed as business expenditure u/s 37.
2. Similarly, IT and interest u/s 234 ABC will not be allowed as deductions for late filing of income tax and for deferment of advance tax. This is also not allowed u/s 40(a)(ii).
3. However the above cannot be equated with GST as tax paid under GST is allowed as deductions subject to sec 43B.
4. Now, whether late fee under GST will be covered under sec 37 and subsequently be allowed as a deduction ? or will it be treated in the same way as sec 234ABC interest and disallow it u/s 40(a)(ii)...?
5. Let us first go through sec 40(a)(ii) where it only deals with the amount in relation to the rate of tax levied on profits and gains from business or profession. So GST late fee will not be disallowed under sec 40(a)(ii).
6. The condition to be satisfied with respect to the allowance of deductions u/s 37 is that it should be for the purpose of business or profession and it should not be paid for infraction of laws. Now the question is whether GST late fee will come under infraction of law..?
7. There is a possibility that it may be viewed as a penalty and subsequently not allowed as deductions. There is nowhere it is specified that interest on late payment is not a penalty. It could be viewed as a penalty for violation of law which ultimately the assessee is responsible. Hence, it may not be allowed as deduction u/s 37.
8. Yet to receive any official notification or explanation on the same.
Please correct me if the above interpretation has an alternative view.