KSAA Insight – Interest On Delayed Payment Of GST

1. Introduction:

Interest is compensatory in character and is imposed on a registered person who has withheld payment of any tax as and when it is due and payable. It is a settled principle¹ that interest is a mere accessory to the principal which has no independent existence of its own. Accordingly, interest is payable on actual loss to the revenue. To avoid cascading effect of taxes the concept of CENVAT was being introduced. Under the said concept, the amount of tax deposited by the supplier would be available as credit to the recipient which can be utilised for future payments of such tax liabilities. Accordingly, to the extent of such credit, the actual tax money is available to the government for disposal. After series of litigation and amendments under the erstwhile law it was settled that liability for payment on interest shall arise on net liability. GST Law also prescribes levy² of interest on delayed payment of GST which is analysed as under.