60.2.5 Interest on refund receivable where tax as per final assessment is lower than provisional assessment

Question-1 [ICAI-F-Ch17-Q7]

Kulbhushan & Sons has entered into a contract to supply a consignment of certain taxable goods. However, since it is unable to determine the value of the goods to be supplied by it, it applies for payment of tax on such goods on a provisional basis along with the required documents in support of its request. On 12 th January, the Assistant Commissioner of Central Tax issues an order allowing payment of tax on provisional basis indicating the value on the basis of which the assessment is allowed on provisional basis and the amount for which the bond is to be executed and security is to be furnished.

Kulbhushan & Sons complies with the same and supplies the goods on 25 th January thereafter paying the tax on provisional basis in respect of said consignment on 19 th February.

Consequent to the final assessment order passed by the Assistant Commissioner of Central Tax on 21 st March, a tax of Rs.1,80,000 becomes due on the consignment.

Kulbhushan & Sons pays the tax due on 9 th April. Determine the interest payable, if any, by Kulbhushan & Sons in the above case.

Assuming all the other facts remaining the same, if consequent to the final assessment order passed on 21 st March, a tax of Rs.4,20,000 becomes refundable on the consignment, refund of which is applied by Kulbhushan & Sons on© The Institute of Chartered Accountants of India 9^th April and tax was refunded to it on 05 th June, determine the interest receivable, if any, by Kulbhushan & Sons in the given case.

Answer

Section 60(4) of the CGST Act, 2017 stipulates that where the tax liability as per the final assessment is higher than under provisional assessment i.e. tax becomes due consequent to order of final assessment, the registered person shall be liable to pay interest on tax payable on supply of goods but not paid on the due date, at the rate specified under section 50(1) [18% p.a.], from the first day after the due date of payment of tax in respect of the goods supplied under provisional assessment till the date of actual payment, whether such amount is paid before or after the issuance of order for final assessment.

In the given case, due date for payment of tax on goods cleared on 25^th January under provisional assessment is 20^th February.

In view of the provisions of section 60(4), in the given case, Kulbhushan & Sonsis liable to pay following interest in respect of the consignment of goods supplied:

= Rs.1,80,000 × 18% × 48/365

= Rs.4,261 (rounded off)

If, in the given case, it is assumed that consequent to the final assessment order passed on 21 st March, a tax of Rs.4,20,000 becomes refundable to Kulbhushan & Sons, answer would be as follows:

Section 60(5) of the CGST Act, 2017 stipulates that where the tax liability as per the final assessment is less than in provisional assessment i.e. tax becomes refundable consequent to the order of final assessment, the registered person shall be paid interest at the rate specified under section 56 [6% p.a.] from the date immediately after the expiry of 60 days from the date of receipt of application under section 54(1) till the date of refund of such tax.

However, since in the given case, refund has been made (05 th June) within 60 days from the date of receipt of application of refund (09 th April), interest is not payable to Kulbhushan& Sons on tax refunded.

60.3 Miscellaneous Question

Quesiton-1 [ICMAI-F-J18-4(a)(ii)-4]

Write a brief note on provisional assessment under section 60 of the CGST Act, 2017.