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12 July 2021

Admitted GST Liability can be discharged in Installments subject to condition of timely payments of installments.

As we all know that the Section 37 of the CGST Act, 2017 deals with the furnishing of FORM GSTR-1 which contains the details of outward supplies made during a particular period. Further, the liability as declared in FORM GSTR-1 shall be discharged entirely through the FORM GSTR-3B as provided under Section 39 of the CGST Act, 2017 of that particular period.

A tax payer is required to make payment of admitted tax liability within the due date only else he/she is liable for the payment of applicable interest and penalty. We have come across the situation where client admits the liability in FORM GSTR-1 however fails to discharge it in FORM GSTR-3B within the stipulated time and therefore liable for applicable interest and penalty. In situation of continuous defaults in discharging the liability, department may suo-motto cancel the registration and consequently the tax payer reaches to the situation where he cannot file its returns until the entire tax liability is discharged by the tax payer.

Now, the question arises whether a tax payer who has admitted his tax liability in FORM GSTR-1 can seek permission from the authorities for payment of GST Liability in installments amid financial crises situation?

A similar issues was observed in case of Malayalam Motors (P) Ltd. vs. Assistant State Tax Officer [2020] 121 taxmann.com 357 (Kerala)- Kerala High Court wherein the Hon’ble Kerala High Court disposed of the writ petition in favor of the assessee.

The relevant excerpt of the cited case law has been reproduced as follows:

  • Issue Involved:
  1. Petitioner is engaged in business of automobile sale.
  2. Petitioner contended that they have filed the sales return in FORM GSTR-1 for the period from February’2020 to May’2020 declaring the total supplies entered into during the given period.
  3. However, enough funds could not be generated due to the COVID situation to pay the entire tax liability for the given period. Therefore, Petitioner pleaded that they are unable to pay the tax in lump sum and should be allowed to file the returns without paying the entire tax admitted.
  4. Petitioner assured to discharge entire tax admitted along with interest and late fees thereon in quick installment.
  5. Hence, they pleaded to be allowed to pay tax in installments.
  • Contention by the respondents:
  1. There is no specific provision in the law for the payment of liability in installments.
  2. Therefore the relief as sought should not be granted.
  • Held by the Honorable Kerala High Court:
  1. Petitioner is not disputing its tax liability and only seeking a facility to pay tax in installments that too along with the interest. Further, this is due to the difficulties faced during pandemic.
  2. Held that respondent should accept the belated returns filed by the petitioner for the period from February, 2020 to April, 2020, without insisting on payment of the admitted tax declared therein.
  3. Further, petitioner is permitted to discharge the tax liability, inclusive of any interest and late fee thereon, in equal successive monthly installments commencing from 15th November, 2020 and culminating on 15th August, 2021.
  4. He is further warned that no default of even single installment should be made otherwise the benefit of granted in judgment will be lost and recovery proceeding will be initiated.
  5. The Hon’ble Kerala High Court with the above findings and observations decided the matter in favor of assessee.