Section 50 – Interest on Delayed Payment of Tax
Section 50 of CGST Act, 2017 – Interest on Delayed Payment of Tax
Updated on: February 2026 (as applicable till date)
Prepared by: Yours Tax Consultant
1. Scope and Importance of Section 50
Section 50 provides for levy of interest where a registered person fails to pay GST within the prescribed time.
Interest under GST is:
- Compensatory in nature
- Automatic and mandatory
- Independent of penalty proceedings
This section is frequently invoked during scrutiny, audit and demand proceedings.
2. Statutory Provision – Section 50
Section 50(1):
Every person who is liable to pay tax
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 interest at such rate,
not exceeding 18%,
as may be notified.
Proviso to Section 50(1):
Interest shall be payable on that portion of tax
which is paid by debiting the electronic cash ledger,
except where such return is furnished after commencement
of any proceedings under section 73 or section 74.
Section 50(2):
The interest 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.
Section 50(3):
A taxable person who makes an undue or excess claim of input tax credit
or undue or excess reduction in output tax liability
shall pay interest at such rate,
not exceeding 24%,
as may be notified.
3. Interest on Net Tax Liability – Key Amendment
Originally, interest was demanded on gross tax liability (including ITC portion), which led to extensive litigation.
Current legal position:
- Interest is payable only on net tax liability
- i.e., portion paid through Electronic Cash Ledger
Exception:
If proceedings under Section 73 or 74 are initiated,
interest may apply on gross liability.
4. Rate of Interest Applicable
As notified:
- 18% per annum – for delayed payment of tax
- 24% per annum – for:
- Undue or excess ITC claim
- Undue or excess reduction in output tax
Interest rate is subject to Government notification.
5. From When is Interest Calculated?
Interest is calculated:
- From the day immediately following the due date
- Till the date of actual payment
Even a one-day delay attracts interest.
6. Interest under Section 50 vs Late Fee
Interest and late fee are distinct:
- Interest (Section 50): For delay in payment of tax
- Late Fee (Section 47): For delay in filing return
Both can be levied simultaneously.
7. Section 50 Read with Section 49
As per Section 49:
- Interest must be paid in cash
- ITC cannot be used for interest payment
Thus, even if ITC balance exists, cash payment is mandatory for interest.
8. Section 50(3) – Excess ITC or Wrong Reduction
Interest at higher rate applies when:
- ITC is wrongly availed and utilised
- Output tax liability is wrongly reduced
Such interest applies even if tax is later reversed.
9. Common Practical Issues
- Interest calculated on gross tax instead of net
- Ignoring interest on delayed GSTR-3B
- Assuming interest is waived automatically
- Interest not paid due to ITC availability
10. Related Provisions
- Section 39 – Furnishing of returns
- Section 47 – Late fee
- Section 49 – Payment and ITC utilisation
- Section 73 – Demand without fraud
11. Judicial Principle (Conceptual)
Interest is compensatory, not penal. However, once liability arises, neither hardship nor ignorance is a valid defence against interest under Section 50.
12. Professional Tip
Always prioritise timely cash payment of tax. ITC balance does not protect you from interest. Section 50 exposure is one of the costliest GST mistakes.
Disclaimer: This article is prepared based on the CGST Act, CGST Rules, notifications and prevailing legal position as applicable till date. Future amendments or judicial pronouncements may require revision.
Comments