Gujarat High Court Directs Issuance of Notices to Govt. over constitutional validity of CGST Act

Gujarat High Court Directs Issuance of Notices to Govt. over constitutional validity of CGST Act

The Gujarat High Court (HC) division bench comprising of Justices J.B. Pardiwala and Ilesh J. Vora directed the Notice to be issued to the Government (respondent authorities) over the constitutional validity of the proviso to Section 50 of the Central Goods & Services Tax Act, 2017 (CGST Act), returnable on 11 February 2021

Flair Writing Industries Limited (petitioner) is a limited company engaged in the manufacture of a wide range of writing instruments such as ball pens, gel pens, fountain pens, etc. The petitioner challenged the constitutional validity of the proviso to Section 50 of the CGST Act regarding the interest on delayed payment of tax.

Advocate Abhishek Rastogi assisted by Advocate Bhavesh Choksi representing the petitioner submitted that the proviso to Section 50(1) of the CGST Act, allowed the benefit of interest on tax payable regarding the supplies made during a tax period, declared in the return for the said period and furnished after the due date.

It was further pointed out that while the petitioner was required to furnish returns every month according to the first proviso to Section 37 of the CGST Act, he was not permitted to revise its returns after September following the financial year in which the tax amount becomes due.

It was argued that the amendment to the CGST Act in the form of the proviso violates the decision taken by the Goods and Services Tax Council (GST Council) in its 31st meeting held on 22 December 2018. In the said meeting the GST Council unanimously decided that interest would not be payable for the delayed payment of tax through electronic credit ledger i.e. interest is applicable only on the 'net liability'.

The petition stated that the Council thought it fit to recommend the Government to levy interest only on the net cash liability irrespective of the classification of the taxpayers. Such mandate from the GST council could not have been overlooked or restricted by the Parliament.

The HC after hearing the submissions of the parties said, "The respondents shall be served directly through email. In the meantime, Mr. Choksi shall furnish one set of entire paper¬book to Mr. Devang Vyas, Solicitor General of India, so that by the next returnable date, Mr. Vyas can seek appropriate instructions in the matter."