Interest on delayed payment of tax – Section 50 of CGST, 2017

[CA.VINOD CHAURASIA]

Introduction:  This article discusses in detail about interest payable on late payment of tax liability under  GST.

Every person who is liable to pay tax under GST fails to pay the tax or any part thereof to the Government within the due date then he shall pay on his own, interest at 18% or 24% P.A. on outstanding tax liability.

Further, the interest shall be calculated from the day succeeding the day on which such tax was due to be paid.

Vide notification no 13/2017 – Central Tax dated 28^th June 2017, interest rate on late payment of GST under section 50 of CGST Act as below:

• Interest on late payment of GST at 18% per annum.
• if any person takes undue or excess claim of input tax credit (ITC) then person shall be liable to pay interest at 24% .
• if any person takes undue or excess reduction in output tax liability then person shall be liable to pay interest at 24% .

http://www.cbec.gov.in/resources//htdocs-cbec/gst/notfctn-13-central-tax-english.pdf

Calculation of late interest on GST with example

Example -1

ABC ltd needs to pay the GST of ₹ 10 lakh on or before 20^th May, 2018. However, it only manages to pay the tax on 20^th June, 2018. Please calculate the Interest on tax which is to be paid.

To calculate the correct interest we need the following:

• Interest rate  (18% as per section 50)
• No. of days default (31 days, we shall not count 20^th may)
• Outstanding tax (Which is ₹ 10 lakh)

Hence, interest on late payment of tax will be ₹ 15,287/- (10 lakh*18%*31/365).

Example -2

Suppose for month of July

Output GST=100000

Input GST=80000

GST payable=20000

This 20000 we have to pay by 20 August (20 of Next Month)

In case we pay the same on 24 August, we are 4 days late

Interest will be calculated as follows

=20000*4/365*18%=39.45

Interest will be rounded off to 39

Total amount payable =20000+39=20039

The author is a practising CA based in Delhi and is registered Insolvency Professional. He can be reached at [email protected] , Mob. +91 9953587496.