Non-liability to pay interest against supplementary invoices under GST

[Amit Agrawal]

FACTS:

A.  M/s XYZ is supplier to automobile OEMs (such as M/s Bajaj Auto, Tata Motors, Maruti Suzuki) is raising Supplementary Invoices (i.e. debit-notes u/s 34 of the CGST Act, 2017) on account of substantial price-increase in raw material (i.e. aluminum). M/s XYZ is also paying differential gst against these supplementary invoices by 20th of month succeeding to 'the month during which these supplementary invoices are raised by you'. But, it has not paid interest there-against u/s 50 of the CGST Act, 2017.

A1. M/s XYZ’s initial selling price was 'Fixed Price' as per Purchase-Order and said PO was not having any 'escalation clause' on any account. And for this reason, the supplier has not opted for 'Provisional Assessment' as per Section 60 of the CGST Act, 2017. M/s XYZ has duly paid gst charged in the original invoice by 20th of succeeding month. 

A2. In the recent past, prices of aluminum (which is principal raw material for goods manufactured by the supplier & sold to OEM) have risen exponentially. Consequently, supplier had requested its customers to allow revision in selling price against supplies already made. After protracted negotiations and as a goodwill gesture, the customer/s (i.e. OEM) agreed to the request resulting in supplier raising supplementary invoices u/s 34 against sales already made in the past.

QUERY:

Question is whether interest is liable to be paid u/s 50 against ‘differential gst’ paid against supplementary invoices?

OUR VIEWS:

B. Liability to pay GST is arisen on the supplier at the time of supply as per Section 12 (1) of the CGST Act, 2017 (i.e. date of original invoice, presuming the situation under discussion falls u/s 12 (2) (a)). 

B1. Resultantly and taking leaf from apex court's reasoning/s given in the case of COMMISSIONER OF CENTRAL EXCISE, PUNE VERSUS M/S SKF INDIA LTD. - 2009 (7) TMI 6 - SUPREME COURT  & COMMISSIONER OF CENTRAL EXCISE VERSUS INTERNATIONAL AUTO LTD. - 2010 (1) TMI 151 - SUPREME COURT read with legal pointed B above read with Section 9 (1), it seems that liability to pay entire gst (i.e. including the differential taxes paid against supplementary invoices) has arisen upon M/s XYZ, the supplier, on the date of original invoice itself. 

(For Para B & B1, please note that potential contrary views, in this regard, are ignored for the purpose of this note).

C. As per facts of the case as listed at the beginning, it is clear that apex court ruling in case of M/S. STEEL AUTHORITY OF INDIA LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE, RAIPUR - 2019 (5) TMI 657 - SUPREME COURT - does not apply to the given situation so as to demand interest against supplementary invoices (i.e. Liability to pay interest under provisional assessment).

C1. Even otherwise and though controversial, it is possible to hold a view that there is no interest liability under provisional assessment in GST (Section 60) as explained in Para F above.

D. However and in view of factual aspects pointed the beginning above read with legal position pointed in Para B & B1, real question - that needs to be considered – is whether the supplier was liable to pay GST (against supplementary invoices) with regards to date of original invoice (i.e. 20^th of month succeeding the month when original invoices were issued) or with regards to 'Date of Supplementary Invoice' (i.e. 20^th of month succeeding the month when supplementary invoices were issued)? 

Simply put, the question is what is the 'Due Date' of paying gst against the original as well as supplementary invoices, respectively, in the given situation? And whether, said ‘Due Date’ is same or different for two types of invoices?

D1. As per Section 39 (7), DUE DATE TO PAY ‘GST AS PER RETURN UNDER SUB-SECTION (1)’ is “NOT LATER THAN THE LAST DATE ON WHICH AN ASSESSEE IS REQUIRED TO FURNISH SUCH RETURN”.

Please note the relevant portion of the said Section 39 (7) as follows: 

"Every registered person who is required to furnish a return under sub-section (1), other than the person referred to in the proviso thereto, or sub-section (3) or sub-section (5), shall pay to the Government the tax due as per such return not later than the last date on which he is required to furnish such return :

...................................."

D2. Details of original invoices were to be reported while filing statement under GSTR-1 and while filing return under GSTR-3/ 3B. And same has been done by the supplier and it has also paid applicable GST within time permitted u/s 37 (7). So, there is no delay in paying GST against original invoices and hence, question of paying interest on that portion of GST liable does not arise.

D3. Similarly, details of 'Supplementary Invoices' are required to be reported in return for 'Tax Period' when such supplementary invoices are issued. This is very clear from wordings of Section 34 (4) of the CGST Act, 2017. Moreover, this position gets further support from Section 37 with Form GSTR-1, Section 38 with Form GSTR-2 along-with Section 39 read with Form GSTR-3 and instructions given along-with all these forms. And same also has been reported by the supplier and it has also paid applicable GST (i.e. differential tax liability) while filing return u/s 39 latest by 20^th of succeeding month.

D4. Consequently, it is clear that in view of legal position pointed in Para D1 above,  'Due Date' of paying gst against the supplementary invoices in the given situation is 20th of month succeeding "the month when such supplementary invoices were issued" and NOT 20th of month succeeding "the month when original invoices were issued". In other words, the supplier is liable to pay interest u/s 50 only if it does not pay taxes against supplementary invoices latest by 20th of month succeeding the month when it had raised those supplementary invoices.

E. This position remains true, in our view, even when supplier’s liability to pay entire gst on "full price" (i.e. price recovered through original invoice as well as additional price recovered through supplementary invoices) had arisen on "date of original invoice" itself as per Section 12 (1) of the CGST Act, 2017 read with Section 9 (1). 

E1. This is because the supplier has deposited ENTIRE gst liability (i.e. against original as well as supplementary invoices) within the respective ‘Due –Date/s’ prescribed u/s 39 (7). In other words, ‘Due Date’ for paying taxes u/s 39 (7) for original invoices and for supplementary invoices are different even though liability to pay entire tax had arisen on date of original invoice itself.

E2. In our view, there is a big difference between "Levy" (i.e. time determining when 'liability to pay taxes' arises) and collection (i.e. when one needs to pay 'tax-liability so arisen'). And when there is no delay in collection as per applicable legal position (i.e. when there is no delay in payment of any portion of taxes beyond the due date from the supplier’s end), there is no question of paying interest. In this regard, your attention is again invited to the wordings of sub-section (1) & (2) of Section 50 as well as Section 37 (7). 

F. Lastly and just some more food for your thoughts: It is important to note that on the plain reading of Sub-section (4) of Section 60 (under ‘Provisional Assessment’), interest is payable only if there is delay in paying gst beyond ‘Due Date’ prescribed under sub-section (7) of Section 39. In view of our understanding of ‘Due Date’ as explained in earlier Paras, we are of the view that said section 60 (4) does not prescribe liability to pay interest just because 'final price' exceeds 'provisional price' determined under section 60 (1). This further supports our view "why reasoning given by the Apex Court in case of M/S. STEEL AUTHORITY OF INDIA LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE, RAIPUR - 2019 (5) TMI 657 - SUPREME COURT, cannot be used directly so as to demand interest against supplementary invoices under GST. 

F1. It is worth noting that all three Supreme Court rulings, quoted above, were dealing with altogether different legal provisions, whereas provisions under GST are very different. And one needs to look into entire things in fresh perspective before coming to any conclusions under GST.  

Summarizing above, we hold a view that M/s XYZ, the supplier, is not liable to pay interest u/s 50 with reference to original invoice-dates while making payment of differential gst against supplementary invoices. 

Thanks for your time,

 

Regards,

Amit Agrawal

Handphone: 9850551033

indirect.tax@gmail.com