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India: Interest payable on gross GST liability; input tax credit

India: Interest payable on gross GST liability

The High Court of Telangana held that tax paid on inputs became an input tax credit only when the return that included a claim for input tax credits was filed. Accordingly, the court held that interest was payable on the gross amount of the goods and services tax (GST) liability.


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The case is: Megha Engineering & Infrastructures Ltd.


The taxpayer delayed filing GST returns for the period from October 2017 to May 2018. The tax liability (net of input tax credit) was paid along with interest calculated on the net tax liability as of the time when the taxpayer filed the returns. The Department of Revenue determined that interest was to be calculated on the total tax liability (gross). In response, the taxpayer sought judicial review.

High Court decision

The High Court held that until a return is filed (self-assessed), the taxpayer is not entitled to an input tax credit. The tax becomes an input tax credit only when a claim is made in the returns. Because of the taxpayer’s delay in filing the return in this instance, the payment of the tax liability—partly in cash and partly in the form of a claimed input tax credit—was made beyond the period prescribed, and thus the liability to pay interest on the gross amount arose automatically. The taxpayer was thus liable for interest on the gross GST liability.

Read an April 2019 report [PDF 690 KB] prepared by the KPMG member firm in India

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