INTEREST LEVIED ON LATE PAYMENT OF GST
In case of late payment of GST on account of delay in filing return, the law mandates charging of Interest on late payment of GST.
As per Section 50 of CGST Act,
(1) Every person who is liable to pay tax in accordance with the provisions of this Act or the rules made thereunder, but fails to pay the tax or any part thereof to the Government within the period prescribed, shall for the period for which the tax or any part thereof remains unpaid, pay, on his own, interest at such rate, not exceeding eighteen per cent*., as may be notified by the Government on the recommendations of the Council.
(2) The interest shall be calculated from the day succeeding the day on which such tax was due to be paid.
(3) A taxable person who makes an undue or excess claim of input tax credit under sub-section (10) of section 42 or undue or excess reduction in output tax liability under sub-section (10) of section 43, shall pay interest on such undue or excess claim or on such undue or excess reduction, as the case may be, at such rate not exceeding twenty-four per cent*., as may be notified by the Government on the recommendations of the Council.
Further proviso to sub-section (1) has been inserted vide Finance (No. 2) Act, 2019, but is has not been notified yet:
[Provided that the interest on tax payable in respect of supplies made during a tax period and declared in the return for the said period furnished after the due date in accordance with the provisions of section 39, except where such return is furnished after commencement of any proceedings under section 73 or section 74 in respect of the said period, shall be levied on that portion of the tax that is paid by debiting the electronic cash ledger ]
*As per Notification no 13/2017 , the rate of interest for delayed payment of GST is notified as 18% for sub-section (1) and 24% for sub-section (3).
Therefore, from the above provision, it is important to note that interest for delayed payment of GST is calculated on the gross liability of GST i.e. output tax liability before taking the credit of input tax. The same has been upheld by Telangana High Court in Writ Petition No.44517 of 2018. To remove this difficulty, proviso discussed above has been introduced but it is not in the force till date (18.03.2020). The GSTIN portal does not calculate this interest, its taxpayer responsibility to calculate & discharge its interest liability.
Example:
Say, a person having liability to pay tax on 20.02.2020 for the month of Jan, 2020
Output Tax liability for the Month of Jan 2020 Rs. 1,00,000/-
Input Tax Credit Available Rs. 80,000/-
Net Tax Liability to be paid in Cash Rs. 20,000/-
However, person discharge his liability of RS. 1,00,000/- on 23.02.2020 in GSTR-3B- Rs. 80,000/- by debiting his electronic credit ledger & Rs. 20,000/- from electronic cash ledger.
Then, the interest liability would be Rs. 148/- (100000*18%*3/365)
For more information on Late Fee liability on delayed filing of GST Return: Visit Late Fee levied for delay in filing GST Return