Interest Under Section 50 of CGST Act 2017

The Government of India mandates specific deadlines for Goods and Services Tax (GST) submissions, which differ based on taxpayer type. Missing these deadlines results in interest costs in addition to the pending GST.

When is Interest Levied under GST Law?

Section 50(1) of the Central Goods and Services Tax (CGST) Act 2017 specifies that interest is applicable in cases where:

• GST is unpaid by the deadline
• GST payments are underpaid

Interest at 18% per annum is levied on any overdue tax liabilities.

Furthermore, if a taxpayer:

• Delays GST deposits
• Makes partial GST payments
• Improperly claims Input Tax Credit (ITC)
• Claims excess ITC
• Incorrectly reduces GST liability

then a 24% per annum interest is imposed on any excessive or incorrect claims. The interest calculation starts from the day after the due date until the tax is paid.

Interest Rate for Late GST Payment

The rate for late GST payments is set at 18% annually. However, in cases of misreporting in GST returns, this rate increases to 24%. Besides interest, additional penalties may apply for inaccuracies or fraudulent declarations.

Interest Calculation Examples

Previously, interest was charged on a gross basis, excluding Input Tax Credit (ITC) benefits. However, Central Tax Notification No. 16/2021 now considers net cash tax liability for delayed payments:
Net cash liability = Gross GST liability - Input Tax Credit
Interest is imposed on gross liabilities only if proceedings involve non-payment, underpayment, incorrect ITCs, or tax evasion.

Example 1:
If ABC Ltd. has a GST liability of INR 40 lakhs due on June 20, 2022, but pays on July 20, 2022, the applicable interest for 30 days delay is INR 59,178/-.

Example 2:
With a tax liability of INR 20 lakhs and an ITC of INR 24 lakhs, an officer disallows INR 16 lakhs as per section 17(5) of the CGST Act, ABC Ltd. has to pay INR 4 lakhs in interest.

Interest on Delayed GST Refund

The Indian Supreme Court ruled that a 6% interest is owed by the department on delayed GST refunds, conditional on significant delays exceeding specified days as adjudicated by previous court decisions.

Interest Levy in the GST Portal

Previous periods' late fees and interests are auto-populated in the GST portal. Taxpayers can adjust these using:
Step 1: Click "Interest and Late Fee" for previous periods.
Step 2: Tick the declaration checkbox to confirm interest liability.
The system computes the interest based on tax liabilities from prior returns. A "View Your Turnover" button shows GSTIN turnover details.

Step 3: Click "Confirm" to continue with GSTR-3B filings. Revisions to auto-populated interest lead to highlighted fields and alerts.

Step 4: Proceed to GSTR-3B's landing page where prior periods' tax details reflect interest and fees.
Note: Use "Save GSTR-3B" to store data mid-process.

Advance Rulings on Interest

In Global United Shipping India Private Limited Vs. Assistant Commissioner of Customs (2019), the Madras High Court determined interest should commence three months post-refund application. Another case, Andhra Organics Limited vs Commissioner of Central Tax (2018), involved calculating interest from the Tribunal's final order date, which contrasted with other rulings favoring a three-month start from application date.