Central Government vide Notification No. 63/2020 – CT dated 25th August, 2020 has notified 1st September 2020 as the effective date from when interest will be calculated only on the net tax liability discharged in cash after adjusting eligible ITC.
The proviso to Section 50(1) providing for 18% interest on net tax liability was inserted by Section 100 of Finance Act (No. 2) of 2019, but no notification was issued to that effect. Earlier, the GST Council in its 39th meeting held on 14th March, 2020 had decided that interest for delay in payment of GST to be charged on net tax liability with effect from 1st July, 2017. The CBIC in its press release dated 26th August, 2020 has clarified that Notification No. 63/2020- CT has been issued prospectively due to technical restriction.
Further, CBIC has assured that no recoveries shall be made for the past period as well by the Central and State tax administration in accordance with the decision taken in the 39th Meeting of GST Council. This will ensure full relief to the taxpayers as decided by the GST Council.
CBIC explanation came in response to an assortment of comments in the social media with respect to Notification dated 25th August 2020 regarding charging of interest on delayed payment of GST on net liability (the tax liability discharged in cash) w.e.f. 1st September 2020.
