Interest under GST Act, 2017

 

Interest under GST Act, 2017

Interest liability on delayed on payment of tax or excess utilization of ITC under goods and services tax act 2017 governed through Sec 50 of the CGST Act, 2017 & Rule 88B of the CGST Rules, 2017.

Section 50 :-  interest on delayed payment of tax.

— (1) Every person who is liable to pay tax in accordance with the provisions of this Act or the rules made thereunder, but fails to pay the tax or any part thereof to the Government 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 eighteen per cent., as may be notified by the Government on the recommendations of the Council:

[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 levied on that portion of the tax that is paid by debiting the electronic cash ledger.]#

(2) The interest under sub-section (1) shall be calculated, in such manner as may be prescribed, from the day succeeding the day on which such tax was due to be paid.

(3) Where the input tax credit has been wrongly availed and utilised, the registered person shall pay interest on such input tax credit wrongly availed and utilised, at such rate not exceeding twenty-four per cent. as may be notified by the Government, on the recommendations of the Council, and the interest shall be calculated, in such manner as may be prescribed.##

# :- Inserted by The Finance (No. 2) Act, 2019 (No. 23 of 2019) – Brought into force w.e.f. 01st September, 2020.

## :- Substituted by the Finance Act, 2022  w.e.f. 01^st July 2017 [ Notification no 09/2022-Central Tax, Dated 05^th July  2022]     

Rule 88B. Manner of calculating interest on delayed payment of tax.-

(1) In case, where the supplies made during a tax period are declared by the registered person in the return for the said period and the said return is furnished after the due date in accordance with 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, the interest on tax payable in respect of such supplies shall be calculated on the portion of tax which is paid by debiting the electronic cash ledger, for the period of delay in filing the said return beyond the due date, at such rate as may be notified under sub-section (1) of section 50.

(2) In all other cases, where interest is payable in accordance with sub section (1) of section 50, the interest shall be calculated on the amount of tax which remains unpaid, for the period starting from the date on which such tax was due to be paid till the date such tax is paid, at such rate as may be notified under sub-section (1) of section 50.

(3) In case, where interest is payable on the amount of input tax credit wrongly availed and utilised in accordance with sub-section (3) of section 50, the interest shall be calculated on the amount of input tax credit wrongly availed and utilised, for the period starting from the date of utilisation of such wrongly availed input tax credit till the date of reversal of such credit or payment of tax in respect of such amount, at such rate as may be notified under said sub-section (3) of section 50.

Explanation.-For the purposes of this sub-rule, -

(1) input tax credit wrongly availed shall be construed to have been utilised, when the balance in the electronic credit ledger falls below the amount of input tax credit wrongly availed, and the extent of such utilisation of input tax credit shall be the amount by which the balance in the electronic credit ledger falls below the amount of input tax credit wrongly availed.

(2) the date of utilisation of such input tax credit shall be taken to be, -

(a) the date, on which the return is due to be furnished under section 39 or the actual date of filing of the said return, whichever is earlier, if the balance in the electronic credit ledger falls below the amount of input tax credit wrongly availed, on account of payment of tax through the said return; or

(b) the date of debit in the electronic credit ledger when the balance in the electronic credit ledger falls below the amount of input tax credit wrongly availed, in all other cases.]

Inserted vide Notification No. 14/2022-CT dated. 05.07.2022 w.e.f. 01.07.2017.

Central Board of Indirect Taxes and Customs, introduced the Central Goods and Services Tax (Amendment) Rules 2022, vide notification no. 14/2022- Central Tax dated 5th July 2022. Rule 88B was inserted vide said amendment rules.

The following table explains the provisions of newly inserted rule 88B of the Central Goods and Services Tax Rules, 2017 –

Section	Rule	Amount on which interest is payable	Period for which interest is payable
Section 50(1) relating to delayed payment of tax vis-à-vis filing of return in Form GSTR-3B	Rule 88(1)	In case of a delayed payment of tax, interest on tax payable will be calculated only on that portion of the tax which is paid via debiting the electronic cash ledger.	Such interest will be calculated from the due date of filing of return till the return is filed
Section 50(1) relating to delayed payment of tax vis-à-vis in all other cases (other than the one covered above)	Rule 88(2)	Interest will be payable on the amount of tax which remains unpaid.	Such interest will be calculated from the date on which the tax was due till the date on which the tax was paid.
Section 50(3) relating to wrongful availment of input tax credit	Rule 88B(3)	Interest will be calculated on the amount of input tax credit which is wrongly availed and utilized. Meaning thereby, that interest is not payable on input tax credit which was only wrongly availed. Interest will be payable only when the wrongly availed input tax credit is utilized.   Input tax credit wrongly utilized = Amount of input tax credit wrongly availed (-) Balance available in the electronic credit ledger.	Interest is to be calculated for the period starting from the date on which the wrongly availed input tax credit was utilized (i.e., date of the utilization of input tax credit) till the date of reversal of such input tax credit.

 

 

 

Date of the utilization of input tax credit means as under –

Cases, wherein, return in Form GSTR-3B is to be furnished	Date of the utilization of input tax credit = Earlier of the due date of the return or actual date of return.
In any other case	Date of debit in the electronic credit ledger.

 

References:-

1.      The Finances Act, 2022

2.      Notification No 9/2022 dated 05^th July 2022

3.      Notification No 14/2022 dated 5^th July 2022