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    Months have been passed, after introduction of GST to replace all other indirect taxes. However, even to date, there are several questions which remainedambiguous and unclarified. One of such issues is Payment and Offset of GST, which is being discussed in this article. 

    As compared to Service Tax and Excise duty regime,the procedure relating to payment of GST is different and which may bring hardships to assesses. 

    The two words that would have an impact on the issue relating to payment of GST are 

    1. Payment of Tax
    2. Deposit of Tax 

    In the old regime, payment of taxes means depositing tax to the credit of Government, thereby generating a challan. But in the GST regime, tax payment cannot be construed as done to government even if a challan with a BRN code, Date and CIN is generated, amount is deposited and reflected in the Electronic cash ledger. It is just a deposit of tax by way of credit to the account of the Government in the authorised bank. This understanding is based on the following rules of CGST Rules, 2017. 

    As per Rule 85(3): Electronic Liability Register 

    Subject to the provisions of section 49, “payment of every liability by a registered person as per his return shall be made by debiting the electronic credit ledger maintained as per rule 86 or the electronic cash ledger maintained as per rule 87 and the electronic liability register shall be credited accordingly” 

    As per Rule 86(2): Electronic Credit Ledger 

    The electronic credit ledger shall be debited to the extent of discharge of any liability in accordance with the provisions of section 49.

    As per Rule 87(1): Electronic Cash Ledger 

    The electronic cash ledger under sub-section (1) of section 49 shall be maintained in FORM GST PMT-05 for each person, liable to pay tax, interest, penalty, late fee or any other amount, on the common portal for “crediting the amount deposited and debiting the payment therefrom towards tax, interest, penalty, fee or any other amount.” 

    In terms of Explanation (a) to Section 49 of CGST Act, 2017,the date of credit to the account of the Government in the authorised bank shall be deemed to be the date of deposit in the electronic cash ledger; 

    From the wordings highlighted above, it is very clear that mere payment of taxes to the credit of the government doesn’t simply imply payment of tax under the GST Laws. 

    As per Section 50(1): Interest on delayed payment of tax. 

    “Every person who is liable to pay tax in accordance with the provisions of this Act or the rules made thereunder but fails to pay the tax or any part thereof to the Government within the period prescribed, shall for the period for which the tax or any part thereof remains unpaid, pay, on his own, interest at such rate, not exceeding eighteen per cent., as may be notified by the Government on the recommendations of the Council.”

    In view of the above provision, interest shall be payable in case of non-payment of liability to the Government. The payment in terms of section 49 read with rules referred above, would be by way of debit to electronic cash or electronic credit ledger, which can be undertaken by filing GSTR-3B. This is called offsetting the GST liability with the tax amount deposited/credited in electronic cash or credit ledger as the case may be. 

    Following illustration can demonstrate the impact of the words depositing and offsetting. 

    Illustration: Let us assume a company is required to pay an amount of Rs. 100 Crores as tax liability and has input tax credit of Rs. 50 Crores. The due date for making the payment is 20. XX. XXXX. If the company has deposited balance Rs. 50 Crores on 20. XX. XXXX and done offsetting on 22. XX. XXXX. Then the company is said to have paid the tax due amount on 22. XX. XXXX but not on 20. XX. XXXX, even though the Government has unconditionally received the tax amount on the said date. In such case, the company is liable for an interest amounting to Rs.9,86,301/-. (Rs.100,00,00,000 *18/100*2/365 (i.e. both cash component as well as credit component)). Thus, just because of delay in non-offsetting,the company may be asked to compensate for an amount of Rs. 9,86,301/- as interest. 

    Though above wordings are clear about the payment of taxes, different stand is possible based on the well-established principle laid down by Honourable Supreme Court in the case of Pratibha processors versus Union of India.(Refer Citation) 

    Para 13 of the said Judgement is held as “ In fiscal Statutes, the import of the words — “tax”, “interest”, “penalty”, etc. are well known. They are different concepts. Tax is the amount payable as a result of the charging provision. It is a compulsory exaction of money by a public authority for public purposes, the payment of which is enforce by law. Penalty is ordinarily levied on an assessee for some contumacious conduct or for a deliberate violation of the provisions of the particular statute. Interest is compensatory in character and is imposed on an assessee who has withheld payment of any tax as and when it is due and payable. The levy of interest is geared to actual amount of tax withheld and the extent of the delay in paying the tax on the due date. Essentially, it is compensatory and different from penalty — which is penal in character.” 

    Thus, from the above judgement it is very clear that the interest component is only compensatory in nature but not penal in character and would be levied on an assessee who holds payment of any tax beyond the actual due date. It is necessary for the department to differentiate two wordings i.e. Interest and penalty.

    By relating the above judgment to the current case, we can clarify that the interest will be paid on withholding of payment of any tax beyond due date, whereas in the current case, the payment is already made to the credit of the Central Government before due date and the only thing which is pending is just offsetting the liability which is purely a procedural compliance. As payment is unconditionally transferred to the exchequer, there is no loss of revenue. Thus, it can be understood from the said Judgement that mere depositing (without offsetting) should amount to the payment of tax. 

    Conclusion: Thus,after going through the facts stated above, it is pertinent that two different stands are possible about the “event of payment” in GST law. However appellate authority’s judgement will be final with respect to the same. 

    As a matter of prudence, it may be suggestable that return filing be made on due date (to the extent possible) by crediting the liability ledger in time, so that no (possible) interest is applicable for delay in offsetting the liability ledger with electronic credit or cash ledger balance.