1. M/s XYZ was served with a Show cause notice dated XX XX 2023, directing the Noticee to pay interest under Section 50 of the CGST Act, 2017 for the delay in filing of GSTR- 3B for period ……to ……..

The quantification of the interest payable as determined by the authority is as below:-

Description	Integrated Tax	Central Tax	State/UT Tax	CESS
Interest	XXXXX	XXXXX	XXXXX	–
Late Fee	–	–	–	–

2. On the verification of the issue, it was found that the department calculated interest on Gross Tax Liability.

NOTICEE’S SUBMISSIONS

The interest on tax payable in respect of supplies made during a tax period and declared in the return for the said period furnished after the due date, shall be payable on that portion of the tax which is paid by debiting the electronic cash ledger.

1. At the outset, it is pertinent to mention here that, as per Section 50 (1) the interest on tax payable in respect of supplies made during a tax period and declared in the return for the said period furnished after the due date, shall be payable on that portion of the tax which is paid by debiting the electronic cash ledger. Provision of Section 50(1) of the CGST Act, 2017 is reproduced verbatim for ease of reference as under:

“Provided that the interest on tax payable in respect of supplies made during a tax period and declared in the return for the said period furnished after the due date in accordance with the provisions of section 39, except where such return is furnished after commencement of any proceedings under section 73 or section 74 in respect of the said period, shall be payable on that portion of the tax which is paid by debiting the electronic cash ledger”

Thus, in present scenario, the Noticee is not liable to pay interest on the Gross Tax Liability as demanded by the Proper Officer in SCN.

2. Further, the Manner of calculating interest on delayed payment of tax is governed by Rule 88B. The relevant extract of which has been reproduced herein below –

(1) In case, where the supplies made during a tax period are declared by the registered person in the return for the said period and the said return is furnished after the due date in accordance with provisions of section 39, except where such return is furnished after commencement of any proceedings under section 73or section 74 in respect of the said period, the interest on tax payable in respect of such supplies shall be calculated on the portion of tax which is paid by debiting the electronic cash ledger, for the period of delay in filing the said return beyond the due date, at such rate as may be notified under sub-section (1) of section 50.

The interest for delayed payment is payable only after deducting the input tax credit availed by the assesse and not on the gross amount.

3. In this regard, reliance can be placed on the following judicial pronouncement rendered by Hon’ble Gujarat High Court in GST:

• M/s. SUMILON POLYSTER LIMITED vs. UNION OF INDIA cited in 2022 Taxo.online 765 wherein under the same circumstances, the Respondents were directed to give effect to the amendment of section 50(1) of the CGST Act brought up by section 112 of the Finance Act, 2021.

CONCLUSION

4. In light of the submissions made above, it is submitted that the Noticee is not liable to pay any Interest as the levy of interest under Section 50 (1) of CGST Act, 2017 is only on the Tax component paid in Cash instead of Gross Tax Liability as charged by the department in the aforesaid notice.

5. Accordingly, present demand to the extent of Rs. XXX/- must be set aside on this ground itself.