Interest on Late Payment of GST

In this article you will find complete information on interest on late payment of GST.

Interest on GST is paid, if :

• You make the GST Payment after due date
• You claim undue or excess input tax credit
• You unduly or excessively reduce the output tax liability

So now the question is what is the due date for Payment of GST?

Section 39(7) provides that tax dues to be paid not later than the last date on which you are required to furnish return. So, date of filing of GSTR 3B is the due date of filing payment of tax.

Next question is, what constitutes the payment of tax? Means when it will be treated that you have made the payment?

Offset of liability under GST is done by debiting the cash ledger and credit ledger. So you can make the GST payment before filing of return, but will be only counted as paid when you file return and debit cash/credit ledger to offset the tax liability calculated in return. In short, tax is paid when you file your return. Rule 85(3)

One more important thing to note that when there is extension of due date of GST 3B returns, the due date of payment also extends to that time, so no interest is payable for that period.

What is the interest rate on late payment of GST?

Interest on GST is paid on Gross or Net Liability?

There is no rule prescribed in GST for calculation of Interest on late payment of GST. There were litigation and confusion on this matter for quite some time. The relevant litigation were,

• Telangana High Court, then in case of Megha Engineering & Infrastructures Ltd. v. Commissioner of Central Tax [2019]: The court dismissed the writ petition and held that interest is payable on gross liability. However the matter is sub-judice, appeal pending with SC.
• Delhi High Court, then in the case of Landmark Lifestyle v. Union of India [2019]

Finally the 31^st GST Council meeting recommended only the net liability of a taxpayer would hereafter be subject to interest.

Example of Interest on Late payment of GST

Suppose M/s ABC Ltd. filed GSTR 3B of the Jan 2020 on 25^th Feb 2020. And the net liability paid was Rs. 50,000/-. It is clear that the due date to file the return/payment was 20^th Feb 2020. The interest on late payment of GST would be @ 18% p.a on Rs. 50,000 for 5 Days Delay. The interest is Rs. 123.

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CA Harish Negi

Hey readers, welcome to my blog investsaver.com. I am Chartered Accountant by Profession and I love to write on tax & money matters. You may ask your queries through comments related to the topic, I will be happy to answer them.

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