HC holds interest leviable on delayed filing of GSTR-3B despite amount deposited in Electronic Cash Ledger

This Tax Alert summarizes a recent ruling[1] of Division Bench of the Jharkhand High Court (HC). The issue involved in the writ petition was whether petitioner was liable to pay interest on delayed payment of tax (due to delay in filing of GSTR-3B) where it had deposited the tax liability in its Electronic Cash Ledger (ECL) before the due date.

HC, while dismissing the writ petition, has observed the following:

• A combined reading of Section 39(7), 49, and 50(1) of the Central Goods and Services Tax Act, 2017 (CGST Act), along with Rule 61(2), 87(6), and 87(7) of the Central Goods and Services Tax Rules, 2017 (CGST Rules) shows that mere deposit of an amount in ECL does not amount to payment of tax. It is only when GSTR-3B is filed, that the amount lying in ECL is debited towards payment of tax.
  
• The contention of the petitioner of having discharged tax liability by mere deposit in the ECL prior to the due date of filing of GSTR-3B return would be against the scheme of GST Law and make GST regime unworkable.
• ECL is just an e-wallet where cash can be deposited at any time by filling requisite Challans. The amount lying in the ECL can be claimed as a refund at any time, following prescribed procedures.
• There is a difference between ITC in Electronic Credit Ledger and cash in ECL. Balance available in ECL is just in the nature of deposit, whereas ITC is available to assessee on account of tax already paid. Hence, under Section 50, interest is computed only on the portion of tax paid by debiting the ECL.

Comments:

• This ruling is likely to impact taxpayers who have taken a position that deposit in electronic cash ledger is treated as payment of tax. 
  
• Earlier, Gujarat HC had held that interest would not be applicable when GST liability was deposited in cash ledger, but return could not be filed owing to technical challenges in GST portal. 
• Various appellate forums under earlier IDT regime have concluded that amount lying in Personal Ledger Account (PLA) is a deposit over which the Government has no right. 

However, Supreme Court under Income Tax has held that the amount deposited in PLA would be treated as payment of tax and allowed as deduction.

 [1] 2022-VIL-745-JHR