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Interest Payable on Gross GST Liability, as Declared in GSTR-3B

Interesting fact about GST is that the interest under GST is calculated on gross liability. The provision of interest on late payment of GST liability is prescribed in section 50(1) of CGST Act, 2017. The provision is reproduced hereunder for convenient reading.

Section 50(1) states that Every person who is liable to pay tax as per the provisions of this Act or the rules made thereunder, but fails to pay the tax within the period prescribed, shall, for the period for which the tax or any part thereof remains unpaid, pay, on his own, interest at such rate, not exceeding 18%, on the recommendation of the GST Council, may be notified by the Government

Unlike late fee charge, the interest liability is not auto calculated by the GST portal. The interest under section 50(1) of CGST Act, 2017 is automatic and is to be reported suo moto that means the taxpayer on his own need to report and discharge interest on delayed payment of GST liability.

Central Goods and Service Tax Act 2017- Section 50 read with notification no 13/2017 dated 28 June 2017 states circumstances for payment of interest and the rate of interest which are as under: –

  1. Section 50(1): – Interest is payable at the rate of 18% when a person is liable to pay tax, fails to pay the tax or any part within the period described.
  2. Section 50(3) :- When recipient has makes an excess or undue claim of ITC as per section 42(10) or undue or excess reduction in output tax liability under section 43 (10) of the CGST Act, rate of interest applicable will be 24% ( on Wrongly claimed ITC), Recently GST department has started sending notices to all taxpayer who has late filed their GSTR 3B for seeking Interest on Gross Tax Liability shown in GSTR 3B & taxpayer across the India is getting the notices for payment of Interest.

If you want to file the return then you date will be for any Month- the last date for filing GSTR-3B is 20th of the subsequent month; an annual interest of 18% is payable on the gross tax amount for any delay.

The CBIC member added that GST Act provides for different methods by which the proper tax officer can recover any amount which is payable to the government. On the date of 10th February 2020, the CBIC (Central Board of Indirect Taxes and Custom) had issued a notice (F. No. CBEC-20/16/07/2020- GST) about the amount of payable interest on Delayed Tax.

In an effort to raise goods and services tax (GST) collections, the Central Board of Indirect Taxes and Customs (CBIC) has sent a directive to zonal heads of the IT (income tax) department to recover a whopping Rs 46,000 crore from taxpayers on account of penal interests arising from delayed payment of tax with GSTR-3B returns.

The CBIC has declared that if any taxpayer has filed returns through GSTR-3B Form, will need to pay interest. The interest paid will be based upon the total tax liability amount as described in the GSTR-3B which has been paid late whether by cash or by utilization of ITC (Input Tax Credit).