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An Easy Way to Avoid Interest on GST Late Payment

Sakshi Jain
Sakshi Jain at April 03, 2023

Know About Interest on GST Late Payments

The GST council at the time of creating GST laws not only decided the tax rates on goods and services but also the interest on GST late payments. You might be curious how does interest on late payment work under the GST regime.

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GST Late Payment

For every late payment made by you, a certain amount of interest will be levied by the Government. Normally, the GST liability shall be settled on or before the 20th of every month. However, failing to do so will attract an interest which will be levied on the late payment. So, let us discuss the interest on GST Late Payment in brief.

Order of GST Payment

Before knowing the interest on GST late payment you should have a fair knowledge about the order of GST Payment.

Whenever a taxpayer pays GST the electronic cash ledger of such taxpayer is credited. And the credit available in the cash ledger is used to settle liability present in the liability ledger of such taxpayer. However, in a case if there is not enough credit in the cash ledger, then the given order shall be followed for GST Payment:

  1.  First of all, the previous tax period dues shall be settled.
  2.  Then all the current tax period dues shall be settled.
  3.  Finally, any other payable amount under GST shall be adjusted.

Interest on GST Late Payment

Generally, 18% per annum interest is applicable on any GST late payment. In a case, if it is found that a taxpayer has stated wrong GST Output tax liability then 24% interest is applicable on such payment. In addition to this, the penalty can also be levied for wrong GST return filing.


Interest Payable on GST Refund

If any amount of interest is payable on the GST Refund by the government, then the following interest rate is applicable on the GST Refund:

Interest Payable on

Rate of Interest

Refund Appealed


Delayed Payment



In a case, if the Appellate Authority or Tribunal passed an order for a refund on the delayed payment, then the government is liable to pay 9% per annum interest on such refund.

Penalty on Wrong GST Credit Use

A notice consisting amount due along with interest and penalty would be issued by the Tax Officer if it is found that the GST credit is wrongly used to evade tax.

You can refer to the below-mentioned table to know the amount of interest applicable on GST late payment. And in case of tax evasion a penalty may also be levied at the rate mentioned below:

Payment Time

Penalty Amount

Prior to show cause notice

15% of the due tax amount

Within 30 days of issuance of show cause notice

25% of the due tax amount

Within 30 days of communication of the order

50%  of the due tax amount

Other case

100% of the tax amount


The Bottom Line

To avoid interest, penalties or other consequences on GST late payments, you need automated GST software that takes care of all your GST compliance. Considering this Masters India has created autoTax GST Software that is tailor-made for handling all your GST compliance worries.

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Use GST API to build your own GST compliance application.

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