FORM GST ASMT-11

(See Rule 99(2))

Reply to the notice issued under Section 61 intimating discrepancies in the return

1. GSTIN : 32AEHPM9073L1Z3
2. Name : KOTTOOR MATHEW JOSE MATHEW
3. Details of Notice : PREVIEW MODE dated 03/10/2019
4. Tax Period : April 2019 to March 2020
5. Reply

Sir,

We are in receipt of the captioned Notice in Form GST ASMT-10 , as per which ,
we have been asked to remit interest, payable on account of delay in filing of
GSTR 3B and payment of tax , for the period April 2019 till March 2020.The
differential interest has been demanded on account of the fact that we have to be
remit interest for the above period on the portion of tax paid by debiting the
electronic cash ledger whereas, in the captioned Notice, the interest has been
computed on the output tax liability, before availment of input tax credit.

We wish to invite your kind attention to the Proviso to Section 50(1), inserted by
the Finance Act 2019, which states as follows:-

"Provided that the interest on tax payable in respect of supplies made during a tax
period und declared in the return for the said period furnished after the due date
in accordance with the provisions of section 39, except where such return is
furnished after 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.”

It is clearly stated in the proviso that interest on tax payable , which has been paid
after the due date prescribed under the GST Act, shall be payable only on the tax
paid by debiting the electronic cash ledger, i.e. after availment of input tax credit .
We humbly submit that the Provision is clarificatory in nature and accordingly
applicable retrospectively, from 1st July 2017, the date of implementation of GST ,
for the following
Reasons:-

1) In Allied Motors (P) Ltd vs. CIT (1997 ) 9l Taxman 205 SC , the Hon'ble
Supreme Court, has held as under:-
:

"A proviso which is inserted to remedy unintended consequences and to make the
provision workable, a proviso which supplies an obvious omission in the section
and is required to be read into the section to give the section a reasonable
interpretation, requires to be treated as retrospective in operation so that a
reasonable interpretation con be given to the section as a whole"

2) Section 50(2) of the CGST/SGST Act, reads as under:

"the interest under subsection (1) , shall be calculated in such manner , as may be
prescribed from the day succeeding the day on which tax was due to be paid”.

It can be seen from above that Section 50(2), provided for computation of
interest in a manner to be prescribed. However, there was no proviso under the
Act or Rules, which laid down the manner of computation of interest, which was
an obvious omission under the Act.
Therefore, the proviso to Section 50(1), inserted by the Finance Act 2019 is to
rectify such omission and hence is clarificatory in nature.

3) The facts here are exactly similar to the one in Allied Motors (P) Ltd vs. CIT
(1997) 91Taxmann 205 SC, cited above.

In this case, which was decided under the income Tax Act 1961 , the issued
involved was whether first proviso to Section 43B of the Income Tax Act 1961
,inserted with effect from 1st April 1988 was retrospective or prospective and
whether the benefit of the proviso could be available to transactions effected
prior to 1-04-1988 . The Hon'ble Supreme Court, citing various High Court
decisions on this matter, held that the proviso supplies an obvious omission and
hence is retrospective in nature.

In the case of interest on delayed payment of GST also, the newly inserted
proviso to Section 50(1), clarifies the manner of computation of interest, which
was clearly missing in the GST statute. This shows that the insertion of the
Provision is to rectify such omission. Accordingly, we humbly submit that the
Proviso is clarificatory in nature and hence applicable retrospectively with effect
from 1st July 2017

In view of the above reasons, we respectfully submit that, we are not liable to pay
the interest, alleged to be payable as per the captioned Notice.

Without prejudice to our above submission, we would also like to submit that
interest is compensatory in nature. It has been held by the Hon'ble Supreme
Court in Prathibha Processors vs. UOI (1996) 11 SCC 101 (SC), that

In fiscal statues, 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. lt is a compulsory exaction of money by a public authority
for public purposes, the payment-of which is enforced by law. Penalty is ordinarily
levied on an assesse 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 assesse who has withheld 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.

It is therefore clearly laid down by the Supreme Court that, levy of interest is on
the actual amount of tax, withheld; it may be noted that when interest is levied
on output tax payable, before availmemt of input tax credit , it results in the levy
of interest on input tax availed by us, which represents the GST collected from us
by our supplier and remitted to the Government . Hence the Govemment ends up
getting interest on an amount, which is already remitted to its account. This
defeats the very nature of the term "interest". Further this all the more highlights
the reason why the proviso section 50(1), was inserted, as a clarificatory
provision. Accordingly we submit that interest on delayed payment of GST due for
a particular month, can be levied only on the net tax liability, after reducing the
eligible input tax credit for the month.
6. Verification

KOTTOOR MATHEW JOSE MATHEW hereby solemnly a firm and declare that the
information given hereinabove is true and correct to the best of my belief and
nothing has been concealed therefrom.

Signature:
Name: KOTTOOR MATHEW JOSE MATHEW
Status: Proprietor