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Administrative instructions for recovery of interest on net cash tax liability w.e.f. 01.07.2017

CBIC on 18th of September 2020 issued GST Policy Wing for administrative instructions for recovery of interest on net cash tax liability w.e.f. 1st of July 2017 to The Principal Chief Commissioners/Chief Commissioners/Principal Commissioners/ Commissioners of Central Tax (All) The Principal Director Generals/Director Generals (All)

In the instruction, CBIC has instructed that The clause of section 50 was amended based on the recommendations of the 35th meeting of the GST Council held on 21st of June 2019, through section 100 of the Finance (No. 2) Act, 2019, to allow for charging interest on net cash tax liability. The said change was to take effect from a date that the government notify. Accordingly, the said provision was made effective vide notification No. 63/2020 — Central Tax dated the 25th August. 2020, w.e.f. 1st of September 2020.

At its 39th meeting on 14th of March 2020, the GST Council proposed that interest be paid on net cash tax liabilities w.e.f. 1st of July 2017 and, accordingly, retrospectively proposed the amendment of section 50 of the CGST Act w.e.f. 1st of July 2017. A retrospective amendment to the GST laws will be enforced in due time through necessary legislation.

After issuance of notification 63/2020-Central Tax dated 25 August 2020, taxpayers were apprehensive that the notification was released in violation of the Council recommendation to charge interest on net cash liabilities w.e.f. 1st of July 2017. A press release, dated 26.08.2020, was released to explain the status. Furthermore, to enact the Council's resolution in its true spirit and, at the same time, to function under the existing legal system, it was agreed to solve the problem by administrative procedures, as provided for in:

  1. For the period 1st of July 2017 to 31st of August 2020, only the net cash tax obligation (i.e. the part of the tax charged by debiting the electronic cash ledger or payable by cash ledger) can be requested to recover interest in the field settlements under the jurisdiction; and

  2. Wherever SCNs have been issued in respect of gross tax payable, the same can be retained in Call Book before the retrospective amendment to section 50 of the CGST Act is made.

In the GST policy wing, CBIC has also asked to provide feedback in case of any difficulty in the implementation of these instructions.

Source - (Twitter, GST INSIGHTS)

Will the State Government authorities governed by such instructions? such instructions should also be passed by State Government.


GST Policy Wing Photo

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