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CMA Intermediate · Direct and Indirect Taxation · Returns and Payment of Taxes

The Commissioner allows Mehta Industries to pay Rs 6,00,000 of tax in 12 equal monthly instalments of Rs 50,000. Mehta pays the first four instalments on time but defaults on the fifth on its due date. What is the consequence under section 80 of the CGST Act?

The entire outstanding balance of Rs 4,00,000 becomes due and payable at once and is liable for recovery without any further notice. Eight instalments of Rs 50,000 remain, including the defaulted one, and the proviso to section 80 accelerates the whole balance when any one instalment is missed.

  1. AOnly the fifth instalment becomes due, with interest
  2. BThe remaining instalments continue unchanged, with a penalty on the fifth
  3. CThe whole outstanding balance of Rs 4,00,000 becomes due and payable forthwith and is liable for recovery without further noticeCorrect
  4. DThe balance of Rs 3,50,000 becomes due after a fresh notice is served

Explanation

Four instalments paid leave 8 x Rs 50,000 = Rs 4,00,000 outstanding, including the defaulted fifth. On default in any one instalment, the whole outstanding balance becomes due forthwith and is liable for recovery without further notice. Rs 3,50,000 wrongly excludes the defaulted instalment and assumes notice is needed.

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