Interest on delayed payment of tax [Section 50] - GST Ready Reckoner - GST

Interest on delayed payment of tax Section 50 of CGST Act makes it mandatory for a tax payer to pay interest on belated payment of tax i.e. when he fails to pay tax (or any part of tax) to the Government s account within the due date/s. Rate of Interest and on which amount calculate [ Section 50(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 18%, as may be notified by the Government on the recommendations of the Council. 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, shall be payable on that portion of the tax which is paid by debiting the electronic cash ledger. Exception :- above proviso does not apply where such return is furnished after commencement of any proceedings under section 73 or section 74 [ or Section 74A [ (w.e.f. 01.11.2024 vide N.No. 17/2024 dated 27.09.2024) inserted vide Finance (No. 2) Act, 2024 ] in respect of the said period. Time period for calculation of interest [ Section 50(2) ] The interest under Section 50(1) shall be calculated, in such manner as may be prescribed, from the day succeeding the day on which such tax was due to be paid. Rate of Interest, Where the input tax credit has been wrongly availed and utilised [ Section 50(3) read with Notification No. 13/2017 Central Tax dated 28th Jun 2017 ] Where the input tax credit has been wrongly availed and utilised, the registered person shall pay interest on such input tax credit wrongly availed and utilised, at such rate not exceeding 24% as may be notified by the Government , on the recommendations of the Council, and the interest shall be calculated, in such manner as may be prescribed. Interest rate specified u/s 50(3) as amended by the vide Notification No. 13/2017 Central Tax dated 28th Jun 2017. the Central Government, on the recommendations of the Council, hereby fixes the rate of interest per annum S. No. CGST Act, 2017 Sections Section description Rate of interest Interest payable TO the Government 1 50(1) Failure to pay tax or part thereof to the Government within period prescribed 18% 2 50(3) For undue or excess claim of ITC or reduction of output tax liability 18% Interest payable BY the Government 3 54(12) Interest on withheld refund 6% 4 56 Interest on delayed refunds 6% 5 Proviso to 56 Interest on refund arising from order passed by Adjudicating Authority/ Appellate Authority/ Tribunal/ Court and not refunded within 60 days 9% Manner of calculating interest on delayed payment of tax [ Rule 88B ] In case, where the supplies made during a tax period are declared by the registered person in the return for the said period and the said return is furnished after the due date in accordance with provisions of section 39, except where such return is furnished after commencement of any proceedings under section 73 or section 74 [or section 74A inserted w.e.f. 01.11.2024 vide N.No. 20/2024-CT dated 08.10.2024] in respect of the said period, Amount on which interest is payable to be computed the interest on tax payable in respect of such supplies shall be calculated on the portion of tax which is paid by debiting the electronic cash ledger, Period for which interest is payable for the period of delay in filing the said return beyond the due date, at such rate as may be notified under section 50(1). [ Rule 88B(1) ] Exception of Rule 88B(1) - In case any amount has been credited in the Electronic Cash Ledger as per provisions of section 49(1) on or before the due date of filing the said return, but is debited from the said ledger for payment of tax while filing the said return after the due date , the said amount shall not be taken into consideration while calculating such interest if the said amount is lying in the said ledger from the due date till the date of its debit at the time of filing return. [ Inserted vide N.N. 12/2024 dated 10/07/2024 ] [ First proviso to Rule 88B(1) ] In other word no interest will be charge on the late payment of GST liability, on or after due date, if already sufficient amount available in the cash leger. In all other cases, where interest is payable in accordance with section 50(1) , Amount on which interest liability to be computed the interest shall be calculated on the amount of tax which remains unpaid, Period for which interest is payable for the period starting from the date on which such tax was due to be paid till the date such tax is paid , at such rate as may be notified under section 50(1) . [ Rule 88B(2) ] In case, where interest is payable on the amount of input tax credit wrongly availed and utilised in accordance with section 50(3) , Amount on which interest liability to be computed the interest shall be calculated on the amount of input tax credit wrongly availed and utilised, Period for which interest is payable for the period starting from the date of utilisation of such wrongly availed input tax credit till the date of reversal of such credit or payment of tax in respect of such amount, at such rate as may be notified under section 50(3). [ Rule 88B(3) ] Explanation -For the purposes of rule 88B(3), - (1) input tax credit wrongly availed shall be construed to have been utilised, when the balance in the electronic credit ledger falls below the amount of input tax credit wrongly availed, and the extent of such utilisation of input tax credit shall be the amount by which the balance in the electronic credit ledger falls below the amount of input tax credit wrongly availed. In other words Having sufficient balance in Credit Ledger means ITC was not utilised . (2) the date of utilisation of such input tax credit shall be taken to be, - (a) if the balance in the electronic credit ledger falls below the amount of input tax credit wrongly availed, on account of payment of tax through the said return; the date , on which the return is due to be furnished under section 39 or the actual date of filing of the said return, whichever is earlier , (b) when the balance in the electronic credit ledger falls below the amount of input tax credit wrongly availed, in all other cases. the date of debit in the electronic credit ledger Other Point Payment of tax as per rule 85(3) be considered only when electronic cash ledger or electronic credit ledger of the registered person is being debited. Mere, credit entry in cash ledger or credit ledger will not tantamount to payment of tax. It may be noted that Section 39 (7) lays down the last date for remittance, as the last date on which the taxable person is required to furnish such return. Also, Section 2(117) lays down that a return shall be considered valid, only if the tax payable as per the return is paid in full. Sections 73(5) (6) provide that if the tax along with interest has been paid, the adjudicating authority shall not serve any show cause notice. Section 73 8) provides that where a person has been served with show cause notice but has made the payment of tax and penal interest under Section 50 within thirty days of issue of notice, no penalty is payable and all proceedings in respect of that tax amount are deemed to be concluded. On a conjoint reading of Sections 50(1), 73(5), 6) and (8 ) of the Act, it is evident that where a person makes a voluntary payment of interest along with belated payment of tax whether admitted on his own or within thirty days from the date of issue of show cause notice, then the proceedings are deemed to be concluded and no penalty is leviable. Other Important Points to Note The term tax here means the tax payable under the Act or Rules made thereunder. The phrase on his own used in section 50(1) indicates that such payment of interest should be made voluntarily (i.e.) even without a demand. There are no specific provisions for payment of interest on the interest amount due. The interest payable under this section shall be debited to the Electronic Tax Liability Register as per Rule 85(1) Such liability for interest can be settled by adjustment with balance in Electronic Cash Ledger but not with balance in Electronic Credit Ledger. Some Important Clarification 1. Clarification on charging of interest under section 50(3), in cases of wrong availment of IGST credit and reversal thereof [ Circular No. 192/04/2023-GST dated 27th July 2023 ]. 2. Utilisation of the amounts available in the electronic credit ledger and the electronic cash ledger for payment of tax and other liabilities [ Circular No. 172/04/2022-GST dated 6th July 2022 ] .