Section 73(5)
This query is : Resolved
Quick Summary
23 July 2022
When GST is collected under section 73(5) after much delay past due date , what does it imply ?
Can penalty be levied ? What is the most honest plea one can take after being paying GST section 73(5) ?
Thank you.
Can penalty be levied ? What is the most honest plea one can take after being paying GST section 73(5) ?
Thank you.
23 July 2022
Section 73(5) implies the voluntary payment. When the tax liability along with applicable interest is paid under section 73(5), before serving notice, there will be no penalty.
25 July 2022
Thank you Mr.Udaya Chandran. Will the interest levied be simple interest i.e. at 1% per months for the number of months delayed ?
23 July 2025
Yes, your understanding is **correct**.
### 🔹 Section 73(5) of the CGST Act, 2017:
It allows a taxpayer to **voluntarily pay** tax **along with interest** *before* a show cause notice (SCN) is issued under Section 73(1). If this is done:
* **No penalty** is levied.
* **No SCN** is issued.
---
### 🔹 Interest Calculation under Section 50:
Interest under **Section 50(1)** of the CGST Act is applicable for delayed payment of tax.
* The rate is **18% per annum** (not 1%) on the unpaid tax.
* It is **simple interest**, calculated on a **daily basis** (not monthly).
**Formula**:
`Interest = (Tax Amount × 18% × No. of Days Delay) / 365`
So if tax was paid late, the department will calculate interest accordingly — for the **actual number of days** the tax payment was delayed.
---
### 🔹 Most Honest Plea You Can Take:
If you have already paid tax and interest under Section 73(5), you can simply state:
> **“The tax was paid voluntarily under Section 73(5) along with applicable interest before issuance of show cause notice. The delay was unintentional and due to \[insert genuine reason: oversight, reconciliation error, cash flow issue, etc.], and I request that no penalty be imposed in light of the voluntary compliance as permitted under Section 73(5).”**
This is legally and ethically sound.
---
Let me know if you'd like help drafting a formal reply or representation to the GST officer.
### 🔹 Section 73(5) of the CGST Act, 2017:
It allows a taxpayer to **voluntarily pay** tax **along with interest** *before* a show cause notice (SCN) is issued under Section 73(1). If this is done:
* **No penalty** is levied.
* **No SCN** is issued.
---
### 🔹 Interest Calculation under Section 50:
Interest under **Section 50(1)** of the CGST Act is applicable for delayed payment of tax.
* The rate is **18% per annum** (not 1%) on the unpaid tax.
* It is **simple interest**, calculated on a **daily basis** (not monthly).
**Formula**:
`Interest = (Tax Amount × 18% × No. of Days Delay) / 365`
So if tax was paid late, the department will calculate interest accordingly — for the **actual number of days** the tax payment was delayed.
---
### 🔹 Most Honest Plea You Can Take:
If you have already paid tax and interest under Section 73(5), you can simply state:
> **“The tax was paid voluntarily under Section 73(5) along with applicable interest before issuance of show cause notice. The delay was unintentional and due to \[insert genuine reason: oversight, reconciliation error, cash flow issue, etc.], and I request that no penalty be imposed in light of the voluntary compliance as permitted under Section 73(5).”**
This is legally and ethically sound.
---
Let me know if you'd like help drafting a formal reply or representation to the GST officer.
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