Section 50, CGST Act 2017 — Interest on Tax Paid Late

What the section does

• A person who fails to pay tax, or any part of it, within the period prescribed pays interest on the amount that remains unpaid, for the period it remains unpaid.
• The rate is 18% a year for ordinary delay in payment. Where input tax credit has been wrongly availed and utilised, the rate is 24% a year.
• Where the return for a period is furnished after the due date, interest is payable on the part of the liability discharged in cash, rather than on the gross liability — the proviso to sub-section (1), which was given effect from 1 July 2017.
• Interest runs by operation of the section. It does not wait for an assessment, a notice or a demand.

Interest

18% a year. 24% a year where input tax credit has been wrongly availed and utilised.

Where people go wrong

• Treating interest as negotiable. It arises from the section, and the department recovers it as tax.
• Computing 18% on the gross liability for a late return. Where the return is filed late, the proviso limits interest to the portion paid in cash.
• Forgetting the higher 24% rate. Credit wrongly taken and used is a different sub-section with a different number.
• Assuming the late fee under section 47 covers it. The late fee is for the return; this is for the money.

Common questions

What is the interest rate for late GST payment?

18% a year under section 50(1) of the CGST Act, 2017, for the period the tax remains unpaid. Where input tax credit has been wrongly availed and utilised, section 50(3) applies a rate of 24% a year.

Is GST interest charged on the gross or the net liability?

Where the return for the period is furnished after the due date, the proviso to section 50(1) charges interest on the portion of the liability discharged in cash. That proviso was given retrospective effect from 1 July 2017.

Does GST interest need a notice before it applies?

No. The liability arises under the section itself for the period the tax is unpaid, which is why a delay discovered during a later reconciliation still carries interest for the whole period.

Act on this

• Section 47 — the late fee for the return itself
• Compliance calendar

• Section 47 — the late fee for the return itself
• Compliance calendar

About this summary

A plain-English summary of what this provision requires, not a reproduction of it and not legal advice. Read alongside the bare Act, and take advice on anything turning on your own facts.