The GST law does not provide the option to pay the tax on time when return could not be filed for reasons like technical issues with GST portal.

By G Gokul Kishore

The Central Board of Indirect Taxes & Customs (CBIC) has instructed its officers to initiate measures to recover interest payable for delayed filing of monthly returns (GSTR-3B). As per FE (February 13), the instruction from Member of the Board puts the figure at over Rs 46,000 crore. Considering the shortfall in tax collections, and the financial year coming to close, the concern and drive are understandable.

Under the GST law, tax payments and filing of returns go hand in hand. As per Section 39(7) of CGST Act, the due date for filing the monthly summary return (GSTR-3B) is the prescribed date for payment of tax as well. The GST law does not provide the option to pay the tax on time when return could not be filed for reasons like technical issues with GST portal. If a taxpayer is forced to file return belatedly due to factors beyond her control, then tax payment also becomes delayed. The consequence is liability to pay interest for the period of delay in payment of tax.

Delinking payment of tax from return filing and making the GST portal glitch-free should precede such missives to officers to initiate recovery proceedings against taxpayers. A taxpayer has the option to pay tax by cash using electronic cash ledger or by using input tax credit as reflected in her electronic credit ledger maintained in the government portal. At the time of filing return and payment of tax for a month, interest for delayed payment of tax is required to be calculated on the total tax liability without adjusting the input tax credit available in the credit ledger. This is done so that till the time the credit amount is utilised and appropriated to the government account, such credit cannot be considered as tax paid.

A benevolent amendment was brought as part of the full Budget last year in August, whereby interest will be payable only on that part of tax which is paid by cash. This was based on the recommendation made in December 2018 by the GST Council. An amendment to Section 50 of CGST Act restricting interest to net tax liability has not yet been brought to force. Seeking interest on delayed payment of tax prospectively after notifying such provision may soften the burden on taxpayers.

As pressure on share from compensation cess increases even while performance on revenue front remains below par, measures to plug revenue leakage are becoming more stringent. The focus is on restricting input tax credit through various amendments and initiating action to recover the dues. The taxpayer-friendly GST regime has the potential of becoming harassing if the extreme powers vested with the tax department are not used with circumspection and discretion.

Two recent changes have caused much consternation among the trade and industry. Input tax credit for a buyer has been restricted to 10% of credit amount as available in invoices, details of which are uploaded by her suppliers in outward supply return (GSTR-1). This will apply to those invoices for which details have not been uploaded by the suppliers. All persons procuring goods and services for use in further supplies will have to verify the compliances of their suppliers if the tax credit availed is to be protected without risking reversal.

The flow of various returns and modifying details by counter-party, as envisaged under GST law, have not been implemented. In such a scenario, restricting tax credit for deficiencies in auto-populated details in purchase returns (GSTR-2A) of buyer based on outward supply return of seller appears to be on a weak wicket. This has come as an additional burden as many taxpayers are being issued letter-cum-notices to reverse credit taken for mismatch between purchase returns and monthly summary returns. Even when goods and services have been received and tax invoices are available with the buyer, for absence of details in auto-populated return, reversal of credit is insisted. This has no legal sanction and businesses suffer immensely due to such action.

Secondly, a new Rule 86A has been brought to check fake invoicing and fraudulent availment of credit. This rule empowers the officer to block input tax credit in certain situations. The rule puts fraudulent practices adopted by supplier and lack of due diligence by buyer in the same basket. Credit can be blocked by the department if buyers fail to ensure that their suppliers have paid tax as shown in the invoices.

GST law provides for compliance rating, and it has not been implemented. The buyer has no facility to know about the compliance behaviour of her sellers. In this backdrop, neither can the buyer be asked to share burden of the department to verify compliances of assessees nor is the buyer equipped with resources to undertake such verification with all her suppliers. Issuing tax invoice without supply of goods to facilitate fraudulent availment of credit cannot be put on par with inability of the buyer to check compliance of seller. Such rough edges in the new provisions need to be ironed out so that the compliant taxpayers are allowed to do business using rightfully earned tax credits without hassles.

The writer is Advocate with Lakshmikumaran & Sridharan. Views are personal