Amendment to Section 50 Prospective or Retrospective- Danger Signals for Taxpayers and Diverse Views in Council and Another matter for the Judiciary- GST Council Minutes-Meeting Dated-21st June 2019
In the 35th GST Council Meeting Held on 21st June 2019, matter regarding prospective and retrospective impact of Amendment of Section 50 of CGST Act, 2017 was discussed and GST Council approved it as a prospective amendment. The matter of prospective/retrospective impact of is sub-judice to Telangana High Court.
Serial No.9: Section 50-Interest on delayed payment of tax
13.14. Shri H.K. Dwivedi, Additional Chief Secretary (Finance), West Bengal, stated that his State supported the proposed amendment and suggested that this should be given retrospective effect as it was a beneficial legislation. The Secretary enquired about the views of the Law Committee regarding enacting this provision with retrospective effect. The Principal Commissioner (GST Policy Wing), CBIC, stated that the Law Committee had considered this issue and they were of the view that since a large number of taxpayers would have paid interest on the full amount, a retrospective amendment could lead to a situation where the Government would be forced to pay large amounts of refund. It was, therefore, felt that it would be better to enact the legislation with prospective effect. The Secretary observed that given the financial outgo and complications in the IT system, enacting this amendment with retrospective effect could create problems.
13.15. The CST, Tamil Nadu, stated that the question of amendment had arisen due to the judgment of the Hon’ble High Court of Telangana. In his view, it was never the intention to levy interest on gross amount and the Hon’ble High Court judgement had resulted in it being interpreted as the gross amount. He added that there could be a few taxpayers who would have paid but the vast majority of taxpayers would have not paid. Therefore, if this provision was not enacted with retrospective effect, it would create problems for the taxpayers and would be a subject of lot of representations. Dr. P.O. Vaghela, Chief Commissioner, State Tax, (CCST), Gujarat, stated that when the law was framed, the intention of the law was clearly to pay interest on the delayed payment on the gross amount of the tax payable. If now a relaxation was being proposed and if it was done with retrospective effect, it would lead to floodgates of refund claims. The Hon’ble Deputy Chief Minister of Bihar stated that the amendment should be on prospective basis in order to avoid potential complications. The Secretary observed that in taxation matters, even the orders ofHon’ ble Courts were mostly with prospective effect and suggested that this provision should be enacted with prospective effect. The Council agreed to this suggestion.
So Amendment is Retrospective not because it should legally be so but because there would be many refund claims. Looks like another matter wherein we haven’t heard the last word. The above minutes may just have highlighted the basic reason behind Judgement of Hon’ble Madras High Court for holding Constitution of Tribunal as Unconstitutional in light of Technical Members exceeding Judicial Members.