Interest under section 50 of the CGST Act, 2017 compensates the government for the time value of tax paid late. It is automatic: no notice or order is needed for the liability to arise.
Delayed payment of tax — section 50(1)
Where tax is paid after the due date, interest is payable at 18% per annum for the period of delay.
Under the proviso to section 50(1), interest on tax for a period that is declared in a return filed late is computed on the portion of tax paid in cash (through the electronic cash ledger), not on the part discharged through input tax credit. This proviso does not apply where the return is filed after proceedings under section 73 or 74 have begun.
Wrongly availed and utilised credit — section 50(3)
Interest arises on input tax credit that is wrongly availed and utilised. Credit that is availed but not utilised does not attract interest. The notified rate is 18% per annum, and rule 88B sets out how utilisation is determined: credit is treated as utilised only when the balance in the electronic credit ledger falls below the wrongly availed amount.
How interest is calculated
Interest = Tax paid late × 18% × Number of days of delay ÷ 365
The period runs from the day after the due date to the date of payment.
Example
GSTR-3B for a month was due on 20 September. It was filed with payment on 4 November. Of the total liability of ₹2,40,000, ₹1,90,000 was set off against input tax credit and ₹50,000 was paid in cash.
- Days of delay: 45
- Interest = 50,000 × 18% × 45 ÷ 365 = ₹1,110
For intra-state supplies, the interest is paid under CGST and SGST in the same proportion as the tax.
Points to note
- Interest is in addition to the late fee for filing the return late.
- The GST portal computes system-generated interest in GSTR-3B in many cases; the taxpayer remains responsible for paying the correct amount.
- Interest cannot be paid from the electronic credit ledger.
The GST interest calculator applies this formula.