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Interest on Late Payment of GST including relaxations of COVID-19

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Section 50 of CGST Act 2017 provides for levy of Interest on delayed payment of Tax under said act. As per sub-section (1), Every person who is liable to pay tax in accordance with the provisions of the Act or the rules made thereunder, but fails to pay the tax or any part thereof within the period prescribed,  he shall, pay, on his own, interest at such rate as may be notified by the Government on the recommendations of the Council.

Sub-section (1) specifically provides for interest liability only when interest has been calculated and paid by assessee on his own motion. Rate of interest has been specified @ 18% per annum in this case.

Sub-section (3) specifically provides for interest liability where interest calculated by assessing officer under section 42(10) and/or 43(10) of CGST Act 2017. Rate of interest under this sub-section has been specified @ 24% per annum.

In this article, we will discuss interest leviable under sub-section (1) of section 50.

As per sub-section (1), where any payment of tax is made after due date, then, he should pay interest @ 18% per annum calculated from the day succeeding the day on which such tax was due to be paid till the date of actual payment of tax.

Interest shall be calculated on net tax liability which is to be paid in cash

At the time of implementation of GST in India (i.e. 01/07/2017), there was no such provision in law to decide that interest on late payment of GST to be paid gross liability of GST or the net liability which is payable in cash.

To clear the position, a proviso was inserted in sub-section (1) vide Finance (No.2) Act 2019 which was notified on 25/08/2020 vide Notification No. 63/2020 to be applicable from 01.09.2020.

As per said proviso, 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, interest shall be levied on that portion of the tax that is paid by debiting the electronic cash ledger. 

As, the proviso was added for tax periods commencing from 01.09.2020, the situation was again in litigation for the tax periods from July 2017 to August 2019.

In the various judicial pronouncements, GST council meetings and other legal platforms, it is being highly recommended that the interest should be levied on net tax liability only from the inception of GST laws (i.e. w.e.f. 01/07/2017).

Finally, in Finance Act 2021, Madam Finance Minister Smt Nirmala Sitharaman, brought up a new proviso substituting the previous one and cleared the ambiguity over interest charging on cash portion only w.e.f. 01.07.2017.

Hence, w.e.f. 01.07.2017, the interest is applicable on cash portion of payment of tax only where it is paid beyond due date.

CGST N/N 16/2021 dated 01.06.2021

Situations still under Litigation

Amendments issued through Finance Act, 2021 is reproduced as :-

“Provided that 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, except where such return is furnished after commencement of any proceedings under section 73 or section 74 in respect of the said period, shall be payable on that portion of the tax which is paid by debiting the electronic cash ledger.”.

As per this proviso, only in followings circumstances, interest is being waved on credit portion :-

  • Supplies made during a tax period are returned in same tax period ; and
  • Return comprising same month supplies filed after due date of same month ; and
  • Said return shall not be filed after commencement of proceedings under section 73 and section 74.

Thus, it is inferred that any sale invoice filed in any return after the same month’s return, shall be liable to interest irrespective of mode of payment (credit/cash ledger).

Relaxations for Interest liability

Due to 2nd wave of Corona Virus (COVID-19) pandemic – 2021

Vide CGST N/N CGST-8/2021 dated 01.05.2021 as amended by N/N CGST-18/2021 dated 01.06.2021, following relaxations are provided in the year 2021 for payment of interest on late payment of GST :-

For Taxpayers having an aggregate turnover of more than rupees 5 crores in the preceding financial year:-

For the tax-period March 2021

    • Due date for GSTR-3B : 20th April 2021
    • Interest for next 15 days after 20th April 2021 : 9% instead of 18%
    • Interest after that i.e. from 6th May 2021 : 18%

For the tax-period April 2021

    • Due date for GSTR-3B : 20th May 2021
    • Interest for next 15 days after 20th May 2021 : 9% instead of 18%
    • Interest after that i.e. from 5th June 2021 : 18%
  • For the tax-period May 2021
    • Due date for GSTR-3B : 20th June 2021
    • Interest for next 15 days after 20th June 2021 : 9% instead of 18%
    • Interest after that i.e. from 6th July 2021 : 18%

For Taxpayers having an aggregate turnover of les than rupees 5 crores in the preceding financial year:-

Who have opted to file GSTR-3B on Monthly Basis

For the tax-period March 2021

    • Due date for GSTR-3B : 20th April 2021
    • Interest for next 15 days i.e. 21 April 2021 to 5 May 2021: Nil instead of 18%
    • Interest for next 45 days i.e. 6 May 2021 to 19 June 2021: 9% instead of 18%
    • Interest after that i.e. from 20 June 2021 : 18%

For the tax-period April 2021

    • Due date for GSTR-3B : 20th May 2021
    • Interest for next 15 days i.e. 21 May 2021 to 4 June 2021: Nil instead of 18%
    • Interest for next 30 days i.e. 5 June 2021 to 4 July 2021: 9% instead of 18%
    • Interest after that i.e. from 5 July 2021 : 18%

For the tax-period May 2021

    • Due date for GSTR-3B : 20th June 2021
    • Interest for next 15 days i.e. 21 June 2021 to 5 July 2021: Nil instead of 18%
    • Interest for next 15 days i.e. 6 July 2021 to 20 July 2021: 9% instead of 18%
    • Interest after that i.e. from 21 July 2021 : 18%
Who have opted to file GSTR-3B on Quarterly Basis

For the tax-period March 2021

Due date for GSTR-3B : where it is 22nd April 2021

      • Interest for next 15 days i.e. 23 April 2021 to 7 May 2021: Nil instead of 18%
      • Interest for next 45 days i.e. 8 May 2021 to 21 June 2021: 9% instead of 18%
      • Interest after that i.e. from 22 June 2021 : 18%

Due date for GSTR-3B : where it is 24 April 2021

      • Interest for next 15 days i.e. 25 April 2021 to 9 May 2021: Nil instead of 18%
      • Interest for next 45 days i.e. 10 May 2021 to 23 June 2021: 9% instead of 18%
      • Interest after that i.e. from 24 June 2021 : 18%

For the tax-period April 2021

    • Due date for payment of Tax : 25th May 2021
    • Interest for next 15 days i.e. 26 May 2021 to 9 June 2021: Nil instead of 18%
    • Interest for next 30 days i.e. 10 June 2021 to 9 July 2021: 9% instead of 18%
    • Interest after that i.e. from 10 July 2021 : 18%

For the tax-period May 2021

    • Due date for payment of Tax : 25th June 2021
    • Interest for next 15 days i.e. 26 June 2021 to 10 July 2021: Nil instead of 18%
    • Interest for next 15 days i.e. 11 July 2021 to 25 July 2021: 9% instead of 18%
    • Interest after that i.e. from 26 July 2021 : 18%

For Composition Taxpayers :-

For the Quarter ending March 2021

Due date for CMP-08 : 18th April 2021

    • Interest for next 15 days i.e. 19 April 2021 to 3 May 2021: Nil instead of 18%
    • Interest for next 45 days i.e. 4 May 2021 to 17 June 2021: 9% instead of 18%
    • Interest after that i.e. from 18 June 2021 : 18%

ufff… find your benefit from above on your own…….

Source:-

CGST N/N CGST-8/2021 dated 01.05.2021 as amended by N/N CGST-18/2021 dated 01.06.2021

Due to Corona Virus (COVID-19) pandemic – 2020

Due to COVID-19 pandemic, government has provided some relaxations in relation to levy of interest on payment of taxes beyond due date for various tax periods. Instead of extending due dates to file GSTR-3B for those tax periods, government chose to provide relaxations in terms of interest free days and lower rate of interest for some further days. Followings are the taxpayers’ category wise relaxations.

For Taxpayers having an aggregate turnover of more than rupees 5 crores in the preceding financial year:-

For the tax period February, 2020, March 2020, April, 2020

    • Nil for first 15 days from the due date, and 9 per cent thereafter till 24th day of June, 2020

Illustration:-

The calculation of interest in respect of this class of registered persons for delayed filing of return for the month of March, 2020 (due date of filing being 20.04.2020) is as illustrated in the Table below:

Sl. No. Date of filing GSTR-3B No. of days of delay Interest
1 02.05.2020 12 Zero interest
2 20.05.2020 30 Zero interest for 15 days, thereafter interest rate @9% p.a. for 15 days
3 20.06.2020 61 Zero interest for 15 days, thereafter interest rate @9% p.a. for 46 days
4 24.06.2020 65 Zero interest for 15 days, thereafter interest rate @9% p.a. for 50 days
5 30.06.2020 71 Zero interest for 15 days, thereafter interest rate @9% p.a. for 50 days and

interest rate @18% p.a. for 6 days

 

Taxpayers having an aggregate turnover of up to rupees 5 crores in the preceding financial year, whose principal place of business is in the States of Chhattisgarh, Madhya Pradesh, Gujarat, Maharashtra, Karnataka, Goa, Kerala, Tamil Nadu, Telangana or Andhra Pradesh or the Union territories of Daman and Diu and Dadra and Nagar Haveli, Puducherry, Andaman and Nicobar Islands and Lakshadweep :-

For February, 2020 : Nil till the 30th day of June, 2020, and 9 per cent thereafter till the 30th day of September, 2020

For March, 2020 : Nil till the 3rd day of July, 2020, and 9 per cent thereafter till the 30th day of September, 2020

For April, 2020 : Nil till the 6th day of July, 2020, and 9 per cent thereafter till the 30th day of September, 2020

For May, 2020 : Nil till the 12th day of September, 2020, and 9 per cent thereafter till the 30th day of September, 2020

For June, 2020 : Nil till the 23rd day of September, 2020, and 9 per cent thereafter till the 30th day of September, 2020

For July, 2020 : Nil till the 27th day of September, 2020, and 9 per cent thereafter till the 30th day of September, 2020

Taxpayers having an aggregate turnover of up to rupees 5 crores in the preceding financial year, whose principal place of business is in the States of Himachal Pradesh, Punjab, Uttarakhand, Haryana, Rajasthan, Uttar Pradesh, Bihar, Sikkim, Arunachal Pradesh, Nagaland, Manipur, Mizoram, Tripura, Meghalaya, Assam, West Bengal, Jharkhand or Odisha or the Union territories of Jammu and Kashmir, Ladakh, Chandigarh and Delhi

For February, 2020 : Nil till the 30th day of June, 2020, and 9 per cent thereafter till the 30th day of September, 2020

For March, 2020 : Nil till the 5th day of July, 2020, and 9 per cent thereafter till the 30th day of September, 2020

For April, 2020 : Nil till the 9th day of July, 2020, and 9 per cent thereafter till the 30th day of September, 2020

For May, 2020 : Nil till the 15th day of September, 2020, and 9 per cent thereafter till the 30th day of September, 2020

For June, 2020 : Nil till the 25th day of September, 2020, and 9 per cent thereafter till the 30th day of September, 2020

For July, 2020 : Nil till the 29th day of September, 2020, and 9 per cent thereafter till the 30th day of September, 2020

Illustration for calculation of interest for taxpayers having turnover upto Rs Five Crore

S. No. Tax period Applicable rate of interest Date of filing GSTR-3B No. of days of delay Interest
1 March, 2020 Nil till the 3rd day of July, 2020, and 9 per cent thereafter till the 30th day of September, 2020 22.06.2020 61 Zero interest
2 22.09.2020 153 Zero interest for 72 days, thereafter interest rate @9% p.a. for 81 days
3 22.10.2020 183 Zero interest for 72 days, thereafter interest rate @9% p.a. for 89 days and interest rate @18% p.a. for 22 days

Refer following notifications and circulars for above :-

CGST-8/2021

CGST-51/2020

CIR- 141/11/2020-GST

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