GST Interest and Penalty Paid Under Protest? HC Offers Relief
The focus keyphrase interest and penalty under GST takes centre stage in a recent High Court judgment that brings relief to many taxpayers. If you’ve ever paid GST under protest during investigation, here’s why this decision could matter to you.
What Was the Case About?
- A taxpayer had deposited GST during a search/investigation.
- The payment was explicitly made “under protest”.
- Later, authorities passed an order demanding interest and penalty, treating that payment as admission of liability.
- The taxpayer moved the High Court.
What the High Court Held
The Hon’ble Court quashed the order, stating:
❝ Payment made under protest cannot be treated as acceptance of tax liability. Therefore, charging interest and penalty was illegal. ❞
This means that unless the taxpayer voluntarily accepts the tax dues, interest and penalty under GST provisions do not automatically apply.
Legal Basis Explained
| Legal Provision | Description |
|---|---|
| Section 73(5) of CGST Act | Allows voluntary payment of tax before notice. |
| Section 73(8) | States that if tax is paid after notice, interest is mandatory. |
| CBIC Circular No. 125/44/2019-GST | Clarifies that voluntary payment must be without protest. |
| Case Law | [XYZ v. Union of India, 2025 HC judgment] – name anonymised for general reference. |
The court emphasized that “voluntary” means free from coercion or protest. If there’s protest, it’s not voluntary — and interest/penalty can’t be slapped.
Practical Impact for Taxpayers
If you’ve paid GST during:
- a search or investigation,
- a summons or inquiry, or
- a demand letter but with protest,
then you may not be liable for interest and penalty, unless liability is later proved.
Expert View
CA Anil Mehra, GST Consultant:
“Always record ‘payment under protest’ in writing while depositing GST during any investigation. It preserves your right to challenge the demand later.”
What Should You Do Now?
- Review past payments made under protest.
- File representation if wrongly charged interest/penalty.
- Maintain proper documentation of protest.
📝 You can also apply for a refund under Section 54 if the case gets closed in your favour.
FAQs: Interest and Penalty Under GST
Q1: Is interest always mandatory under GST?
No, only if the tax is admitted or proved due.
Q2: What if I paid during a DGGI raid?
If marked “under protest”, interest and penalty may not apply.
Q3: Can I claim refund of such payment?
Yes, if you prove it was paid under protest and not due.
🔗 Related:
- Read Section 73 of CGST Act (.gov.in link)
- CBDT vs CBIC: Protest Payment Concept (internal Efiletax link)
Summary
High Court rules that GST paid under protest does not mean admission of liability. Interest and penalty under GST cannot be imposed in such cases.