CA Amit Harkhani
Quick Summary
INTRODUCTION
The Government of India has specified the due dates to pay Goods and Services Tax. The due date to pay GST is different for different types of taxpayers. If one fails to pay GST within the due date, one must pay the interest along with the GST dues for the delay period.
RELEVANT SECTION & RULE
- Section: Section 50 of CGST Act, 2017
- Rule: Rule 88B of CGST Rule, 2017.
CIRCUMSTANCES WHEN INTEREST TO BE PAID
1) Interest related to GST on sales (Section 50(1))
- Fails to pay such GST within the period as prescribed by GST Act, 2017 and Rules.
- Makes short payment for the GST.
2) Interest related to ITC (Section 50(3))
- Wrong ITC availed ANDUtilized.
- ITC availed ANDUtilized over what they are eligible.
RATE OF INTEREST
- Interest related to GST on sales: 18% p.a.
- Interest related to ITC: 24% p.a.
INTEREST LEVY UNDER GST
EXAMPLES
1) ABC Ltd. Has to pay GST on outward supply is Rs. 40 Lakhs and have ITC of Rs. 20 Lakhs in January 2023 and the due date for January Return is 20th of Feb 23. But ABC Ltd. Have file the January return on 28th of Feb 23. What is the Interest Amount?
Ans:
- GST on Sales Rs. 40 Lakhs.
- ITC of Rs. 20 Lakhs.
- Net Cash Liability of Rs. 20 Lakhs.
- Interest Rate is 18%.
Interest: {20 Lakhs*18%*8/365} = Rs. 7,890/-
2) ABC Ltd. Has to pay GST on outward supply is Rs. 40 Lakhs and has ITC of Rs. 60 Lakhs in January 2023 and the due date for January Return is 20th of Feb 23. But ABC Ltd. Have file the January return on 28th of Feb 23. What is the Interest Amount?
Ans:
- GST on Sales Rs. 40 Lakhs.
- ITC of Rs. 60 Lakhs.
- Net Cash Liability of Rs. NIL
- Interest Rate is 18%.
Interest: NIL.
IMPORTANT POINTS RELATED TO ITC AVAILED AND UTILISED
1) Input tax credit wrongly availed shall be construed to have been utilized, when the balance in the electronic credit ledger falls below the amount of input tax credit wrongly availed, and the extent of such utilization 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.
2) The date of the utilization of such input tax credit shall be taken to be,
- 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, 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 of debit in the electronic credit ledger when the balance in the electronic credit ledger falls below the amount of input tax credit wrongly availed, in all other cases.
FAQ :
Interest is payable under GST if you fail to pay the tax within the prescribed due date or if you make a short payment of GST on sales. It is also applicable if you wrongly avail and utilise Input Tax Credit (ITC).
The interest rate for late payment of GST on sales is 18% per annum. For wrongly availed and utilised Input Tax Credit (ITC), the interest rate is 24% per annum.
The payment of interest under GST is governed by Section 50 of the CGST Act, 2017, and Rule 88B of the CGST Rules, 2017.
Interest on GST on sales is calculated on the net cash liability (GST on outward supply minus eligible ITC) for the period of delay. For example, if the net liability is Rs. 20 Lakhs and the delay is 8 days, with an 18% annual interest rate, the interest would be approximately Rs. 7,890.
ITC is considered utilised when the balance in your electronic credit ledger falls below the amount of wrongly availed ITC. The date of utilisation is either the due date for filing the return or the actual filing date, whichever is earlier, if the ledger balance drops due to tax payment. Otherwise, it's the date of debit from the electronic credit ledger.
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