Penalty on GST deposited after 30 days of due date

This is to apprise you that Hon’ble Kerala High Court (‘HC'), in the case of Global Plasto Wares, WP(C) No. 33787 of 2023, has held that penalty would be applicable if taxpayer fails to deposit GST collected from customers within 30 days from the due date.

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Facts?

·??????????? The assessee discharged all the taxes along with interest before 30 days from the date of issuance of a Show Cause Notice (‘SCN’).

·??????????? The Department levied a penalty under Section 73(11) of the CGST Act.

·??????????? However, the penalty was challenged by the assessee by taking shelter under Section 73(8). The said provision provides that if a person has been issued an SCN and he pays all the taxes along with interest payable within 30 days of issuance of SCN, penalty would not be payable.

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HC Decision

·??????????? Section 73(8) comes into play when an assessee has not paid the tax on the transactions. However, where the assessee has collected from others and not credited it to the Government within 30 days, Section 73(11) is applicable.

·??????????? If a person chargeable to tax fails to deposit the tax collected by him within 30 days from the due date of tax payment, Section 73(8) will not have any effect and such a person is liable to pay penalty.

GABA & CO. | Remarks?

·??????????? The decision would create problems in genuine cases as well. For example, even if a taxpayer has deposited the tax collected from customer on 31st day along with full interest, penalty of 10 percent still becomes applicable.

·??????????? Similarly, couple of High Courts have also ruled that where only GST is deposited without payment of interest, 10 percent penalty will still be applicable on the amount of GST.

·??????????? In our view, Section 73(11), inter alia, violates Article 14 of the Constitution since it fails to distinguish genuine taxpayers from defaulters.

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Disclaimer:

The views expressed in the update are strictly personal, based on our understanding of the underlying law. We are not responsible for any injury, loss or cost arising to any person who refers this update and acts or refrains from any act accordingly. We would suggest that a detailed legal advice must be sought before relying on this update.