Breach of Trust by Government- Notification No 63/2020 Dated 25.08.2020

Text of Notification No 63/2020- Central Tax Dated 25th August 2020

In exercise of the powers presented by sub-section (2) of section 1 of the Finance (No. 2) Act, 2019 (23 of 2019), the Central Government hereby appoints the first day of September, 2020, as the date on which the provision of section 100 of the Finance (No. 2) Act, 2019 (23 of 2019), will come into force.

Facts of the issue:-

According to Sec 50 (1) of the CGST Act 2017 Every individual who is subject to pay tax as per the provisions of this Act or the guidelines made there under, yet fails to pay tax or any part thereof to the Government within the period prescribed, will, for the period for which the assessment or any part thereof stays unpaid, pay, all alone, interest at such rate, not surpassing eighteen percent, as might be notified by the Government, on the suggestion of the Council.

The legislation effective from 1st July 2017 did not provide the needed clarity on whether the levy of interest is on gross liability or net liability remaining after setting off the ITC.

In the 31st GST Council meeting held in New Delhi on 22nd December 2018-'Amendment of Section 50 of the CGST Act was proposed to give that premium ought to be charged distinctly on the net tax liability of the taxpayer, subsequent to considering the permissible input tax credit, i.e., interst would be leviable just on the sum payable through the electronic cash ledger.''

Amendment was embedded through the Finance Act, 2019 authorized on 1st August 2019, however the same was not notified.

In 39th GST Council meeting held on 14th March 2020 it was proposed that as a measure for Trade Facilitation Interest for delay in payment of GST to be charged on the net cash tax liability w.e.f. 01.07.2017 (Law to be amended retrospectively).

Today i.e 25th August 2020 Notification No 63/2020 Central Tax has been given which states Interest in GST to be imposed on "Net Tax liability", a proviso, which was embedded vide segment 100 of the Finance (No. 2) Act, 2019 (23 of 2019), presently got notified w.e.f 01/09/2020 vide Notification No. 63/2020-Central Tax, dated. 25th August, 2020.

Clearly this is Breach of Trust on part of Central Government and CAs, Council of the Institute of the Chartered Accountants of India and other professionals must raise this issue. This has to be rolled back.