Jharkhand HC: Mere Deposit of GST in Electronic Cash Ledger Doesn’t Discharge Tax Liability

The Jharkhand High Court has ruled that a mere deposit of Goods and Services Tax (GST) in the Electronic Cash Ledger (ECL) can not be considered as the discharge of the tax liability.

The petitioner raised the below questions:

  • Why can’t the amount deposited in ECL through valid challans before filing the GSTR-3B be treated as the discharge of the tax liability due in case of late filing of GSTR-3B?
  • Also, in the same scenario, why is the department charging interest for the late filing of GSTR-3B?

Also, the petitioner contends that:

  • Interest cannot be levied on the delayed filing of a return but only on delayed tax payments. 
  • They have already paid the late fee for the delayed filing of a return under Section 47. 
  • They deposited net tax liability after the adjusting Input Tax Credit (ITC), which was available to him much before the due date.
  • Also, the department can levy interest only on the net tax liability but not the gross tax liability.
  • Section 39(7) stipulates that taxpayers must pay tax before the GSTR-3B due date, and they can pay even before the GSTR-3B due date. 
  • When an amount is deposited in the government bank account, it will be credited to the ECL. Upon the filing of GSTR-3B, the tax due is just shown as debited from the ECL.
  • Accordingly, there is no money transfer from the petitioner’s end as the tax due was already in the government exchequer.

Section 39(7) states that GSTR-3B return filers must pay the tax due to the government on or before the GSTR-3B due date. The GSTR-3B due date is the 20th day of the succeeding month, and late filing attracts a late fee under section 47.

The division bench observed that the electronic cash ledger is just an e-wallet where taxpayers can deposit cash at any time by creating the challans. Also, the registered taxpayer can claim a refund of the tax deposited in the ECL.

Accordingly, the Court ruled that the GST department had correctly computed the interest on delayed payments and directed the petitioner to pay the disputed amount of Rs.13,23,782.99. Also, there is no case of refund as the petitioner has already paid his liability towards interest by filing DRC-03.

For any clarifications/feedback on the topic, please contact the writer at dvsr.anjaneyulu@clear.in

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