HC holds interest not leviable on delayed filing of GSTR 3B when amount of tax is deposited in Electronic Cash Ledger

This tax alert summarizes a recent judgement of the Madras High Court (HC) [1] on applicability of interest where tax amount was deposited into Electronic Cash ledger (ECL) but return was not filed.

HC observed that:

• Section 39(7) of Central Goods and Services Tax Act, 2017 (CGST Act) provides that the tax should be paid to the Government before the last date for filing the GSTR-3B returns. Thus, it is immaterial whether GSTR-3B is filed within due date or not for remittance of tax to the account of Government.
  
• Once the amount is deposited, it should be made available to the Government for their use and the Government cannot wait or postpone the utilisation of the said amount until the date of filing GSTR-3B.
  
• The date when the amount is deposited or credited to the Government will be the actual date of discharge of tax liability. 
  
• If any amount is deposited after due date, only for the said amount, the liability to payinterest would arise.
  
• The law laid down by Jharkhand HC in RSB Transmission and Telangana HC in Megha Engineering  are not in line with the provisions of the CGST Act.
  

Accordingly, HC held that since the tax amount has already been credited to the Government within the prescribed time limit, there will be no interest liability.  

Comments

• The judgment provides much needed relief to taxpayers who could not file GSTR-3B on time but paid the tax in the Electronic Cash Ledger to prevent interest liability. 
  
• Since there are divergent High Court rulings on the subject, the issue is likely to be finally settled by the Supreme Court.
  
• It may have to be analyzed whether the ruling can be applied to cases where the tax was short paid in the return, but sufficient balance was maintained in the cash ledger.
  

[1] TS-19-HCMAD-2024