Interest under section 50 of the GST Act, Not Payable if Amount Equal to Tax is Available in the Electronic Cash Ledger  

Eicher Motors Limited, a prominent automotive company, found itself entangled in a legal battle as it challenged the interpretation of Section 50(1) of the Goods and Services Tax (GST) Act before the esteemed Madras High Court. Seeking clarity and a fair resolution, the company aimed to shed light on the applicability of interest under this section. In its pursuit of justice, Eicher Motors Limited presented the argument that interest should not be imposed if the GST amount in question was readily available in the Electronic Cash Ledger (ECL) and was, in fact, equal to the tax due.

This contention aimed to emphasize the importance of maintaining a fair and equitable system where interest is only charged when necessary. To support its case, the petitioner highlighted the fact that it had already made substantial payments towards GST, utilizing both Input Tax Credit and cash. This demonstration of compliance and financial responsibility further underscored the need for a balanced interpretation of Section 50(1) to prevent undue burden on businesses.

The fact of The Case

• The assessee paid the tax in the electronic cash ledger before the due date of GSTR 3B for FY 2017-18
• However, due to a technical glitch, the assessee could not file the GSTR 3B in time.
• The Department issued a notice demanding interest for alleged belated payment and filing of return

Courts Verdict

• In view of the above finding and following the law laid down by the Gujarat High Court in the aforesaid Vishnu Aroma case, since in the present case, the tax amount has already been credited to the Government within the prescribed time limit, i.e., before due date, the question of payment of interest would not arise. Under these circumstances, this Court passes the following orders: 1) The credit to the account of the Government would always occur not later than the last date for filing the monthly returns in terms of the provisions of Section 3 9(7) of the Act. 2) Once the amount is paid by generating GST PMT-06, the said amount will be initially credited to the account of the Government immediately upon deposit, at which point, the tax liability of a registered person will be discharged to the extent of the deposit made to the Government. Thereafter, for the purpose of accounting only, it will be deemed to be credited to the ECL as stated in Explanation (a) to Section 49(11) of the Act. 3) As long as the GST, which was collected by a registered person, is credited to the account of the Government not later than the last date for filing the monthly returns, to that extent, the tax liability of such registered person will be discharged from the date when the amount was credited to the account of the Government. If there is any default in payment of GST, even subsequent to the due date for filing the monthly returns i.e., on or before the 20th of every succeeding month, for the said delayed period alone a registered person is liable to pay interest in terms of Section 50(1) of the Act.

• The court held that payment of tax amount to the electronic cash ledger signified receipt of tax by the government.

• No interest will be payable merely on account of belated filing of returns once the tax itself was paid to the electronic cash ledger which shall be the date of receipt of tax amount by the government.