- Vide Decision Of High Court Of Telangana in Megha Engineering and Infrastructures Ltd. v. Commissioner of Central Tax
Facts of the case:
- Case of the petitioner is that the GST portal is designed in such a manner that unless the entire tax liability is discharged, the system will not accept the return in Form GSTR-3B. For example, even if an assessee was entitled to set off to the extent of 95% by utilizing ITC, the return cannot be filed unless the remaining 5% is also paid.
- There was an delay on the part of the petitioner in filing the return for the period October 2017 to May 2018 and which was due to shortage of ITC available to offset the entire tax liability. Total tax liability of the petitioner for the period July 2017 to May 2018 was Rs.1014,02,89,385/- and the ITC available during this period was Rs.968,58,86,133/- and the shortfall to the extent of Rs.45,44,03,252/- was required to be paid by way of cash. Due to certain restraints they could not make the payment and file return within the due date but the entire liability was discharged in May 2018-Consequently, the department demanded interest @18% in terms of Sectin 50 of the CGST Act, 2017.
Judgement: The Honorable High Court of Telangana held that -
“In view of Section 50(1), the liability to pay interest arises automatically, when a person who is liable to pay tax fails to pay the tax to the Government within the prescribed period – liability to pay interest is in respect of the period for which the tax remains unpaid. Until a return is filed, no entitlement to credit and no actual entry of credit in the electronic credit ledger takes place. It is only after a claim is made in the return that the same gets credited in the electronic credit leger and it is only after a credit is entered in the electronic ledger that a payment could be made even though the payment is only by way of paper entries - the tax already paid on the inputs of supplies of goods and services available somewhere in the air should be tapped and brought in the form of credit entry in the electronic credit ledger and payment has to be made from out of the same if no payment is made, the mere availability of the same will not tantamount to actual payment. As the payment of the tax liability, partly in cash and partly in the form of claim for ITC was made beyond the period prescribed, the liability to pay interest u/s 50(1) arises on the gross tax liability.Only when the payment is made, the Government gets a right over the money available in the ledger.Since ownership of such money is with the dealer till the time of actual payment, the Government becomes entitled to interest up to the date of their entitlement to appropriate it. Hence, the claim made by the respondent for interest on the ITC portion of the tax cannot be found fault with.