Interest on Net Tax Liability – Prospective or Retrospective?
Interest on Net Tax Liability – Prospective or Retrospective?
Interest provisions and Brief History
➢ Interest is on failure to pay the tax within the prescribed period
➢ Section 49 – payment may be through cash/credit ledger
➢ Megha Engineering (Telegana High Court)
- Allowed to utilize ITC once it enters the credit ledger
- Ownership with taxpayer till such entry
- Payment on gross tax liability
➢ Proviso inserted in 50(1) through Finance Act 2019
- Where return filed after the due date, interest payable on the portion payable through cash ledger only (except Section 73/74)
➢ 39th GST Council meeting on 14/03/2020 –to be retrospective
➢ Not. 63/2020-CT dtd 25/08/2020 – effective from 01/09/2020
Related Topic:
Tax Liability on Issue of Gift Vouchers.
Grounds for retrospective implications
➢Amendment which only clarifies the intent of the legislature is called as explanatory / declaratory statute
➢Reason for passing declaratory Act is to set aside what the Parliament deems to be a judicial error [Justice G.P. Singh]
➢Explanatory Act is to supply obvious omission and to clear up doubts as to the meanings of the previous Act – to apply retrospectively (Keshavlal Jethmal Shah vs. Mohanlal Bhagwandas – SC)
➢ Where legislature confers benefit on some person without detriment to some other person and such benefit is the legislator’s object, the presumption is that it would have a retrospective effect (Vatika Township – SC)
Other Defenses against gross tax liability
In Adjudication/Appellate process
➢Interest is compensatory in nature [Pratibha Processors (SC)]
➢Fault in the nature of return filing process
➢Credit availed in the books
➢Credit already available with Govt -Revenue neutral process
Direct Recovery u/s 75(12)
➢ Opportunity of being heard u/s 75(4)
➢ Amount payable(unless admitted) to be determined only after adjudication process [Mahadeo Construction (Jharkhand)]
➢ Quantification of interest cannot be by way of unilateral action [CGST v. Daejung Moparts Pvt. Ltd. and ors]
➢ Assessee can still produce material that there was no delay, so opportunity mandatory [LC Infra Projects (Karnataka)]
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