Levy of Interest on Net GST Liability instead on Gross GST Liability


  • • As per The Central Goods and Services Tax Act, 2017. The Interest is applicable in case there is delay in Payment of the GST which is due.
  • • Interest is levied @ 18% per annum for delay in remittance of GST to the Govt. The Interest was levied at the Gross Liability of GST (Before Set-off of ITC).
  • • Due to a decision dated January 6th, 2020 in Madras High Court it was held that the Interest be levied on Nett Liability instead of Gross Liability.


  • • In the Recent Case of “Refex Industries Limited vs The Assistant Commissioner of CGST and Central Excise”, Madras High Court held that Interest u/s 50 of CGST Act, 2017 be levied on the belated “cash” component of Tax and not on the “ITC” Component of Tax.
  • • As per the Case, the following facts were considered:
    • Section 50 is to be applied if the state is not provided sufficient funds to credit to the Assessee’ s Output Tax Liability. The proper application of this section will be on delayed cash payment but not on ITC.
    • The High Court commented that proviso to Section 50(1), which states that Interest will be levied on the part of the tax which is paid in cash has been inserted effect from August 1st, 2019. The Proviso should be read as clarificatory and operative retrospectively.

Examples & Illustration

  • Let Say, Mr. Aryan is a registered Taxpayer and has delayed in making the payment of GST Payment for the month of December 2019. The due date for the payment of GST for the month of December 2019 is 20th January 2020.
  • The Output and Input GST Details of Mr. Aryan is given below:
  • The impact of the insertion of Proviso is given below:


  • • The above judgement was retrospective application of Proviso to section 50(1). The proviso was meant to be added in the Finance Bill, 2019 via clause 100. The same was considered in the 39th GST council Meeting held on 14th March and will be notified on 1st April 2020 as per the press release of the meeting.
  • • In a nutshell, since the above proviso which was issued as a relief to the taxpayers was considered in GST Council meeting and will be notified. Hence, the Interest as per Section 50(1) will be paid only on net liability and such the proviso will have a retrospective effect from 1st July 2017.

Disclaimer:“The information contained herein is only for informational purpose and should not be considered for any particular instance or individual or entity. We have obtained information from publicly available sources, there can be no guarantee that such information is accurate as of the date it is received or it will continue to be accurate in future. No one should act on such information without obtaining professional advice after thorough examination of particular situation.”

Prepared By

Dilip Jangid

Date: 19/03/2020