MSMEs Urged PM Narendra Modi to Clarify Section 50 (1) To Avoid Havoc Among Taxpayers

Ahilya Chamber of Commerce and Industry has reached out to Prime Minister Narendra Modi by sending a memorandum showing their concern towards the taxpayers saying that the interpretation Section 50 (1) causes havoc among taxpayers.

Instead on not only working on the principle of natural justice to taxpayers, GST council imposes interest on GROSS TAX for belated payment of tax and returns despite it's having earlier in its 31st meeting, that interest is payable on NET Tax liability only.

GST law committee has accepted the mistake made while drafting the law and has come with Proviso in Section 50(1). It was inserted in the Finance Act 2019 from date to be notified.

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

The Proviso in Section 50 (1) has been passed in Lok Sabha, Rajya Sabha, included in Finance Act, 2019, passed by and all states + UT except only 2 states (namely Telengana and West Bengal).

A very balanced judgment was passed by Madras High Court in January 2020 after studying GST Law, Proviso inserted in finance Act 2019, practical aspect of GST, Flow of ITC and tax in GST.

CBIC has not taken cognizance of Finance Act 2019 & Madras high Court decision which violates the very founding principles of GST.

Reportedly, to illustrate, the interest of the late filing of returns is approximate INR.46000 Crore if calculated on the gross amount.

However, if the same is calculated on the net tax amount, it will be only Rs.3,000 crores or so.

At the end of the letter, Ahilya Chamber of commerce and industry requests PM to appoint the highest authority in the Government of India, to instruct Finance Ministry to issue a directive to CBIC to stop taking any coercive action.

If CBIC does not take immediate action, there will not only be heavy unrest in Taxpayer fraternity but some of them may be compelled to close down, resulting in widespread unemployment.