Interest Rates Under GST Act

Applicability of Interest under GST:-

SR.NO PARTICULARS SECTION GOVERNED INTEREST RATE (P.A)
1. Payment of Tax After Due Date 50(1) of GST Act

18%

2. Contravention output tax liability of the recipient in the return(Input Tax Credit has been claimed in excess or where it was not eligible to be claimed) 50(3) read with Section 42(10)

24%

3. Contravention output tax liability of the supplier in the return 50(3) read with Section 43(10)

24%

4. Interest on Delay In Payment of Refund 56 read with read with Section 54(5)

6%

5. Interest on Delay in Payment of Refund(In Respect of Appeal) 54(12) read with Section 54(11)

6%

6. Interest on Delay in Payment of Refund (Order Passed by Appellate Authority or Appellate Tribunal or Court) Proviso of Section 56

9%

 

1. Interest on Payment of Tax After Due Date :-

This is the type of the interest that is most commonly paid by the taxpayers.As per Section 50(1) of GST Every Person who is liable to pay the tax as per the provisions of this act or Rules made thereunder, but fails to pay the same before the time-limit period prescribed shall pay for the period on his own, interest not exceeding 18% p.a for the period for which the tax has remained unpaid.

Illustration

XYX & Co needs to pay the GST of Rs 5,00,000/- on or before 20th April 2018. However, it can pay the tax only by 20th May 2018. Please calculate the interest on GST required to be paid by XYZ and Co

Answer:-

To compute the interest liability we need to obtain following 3 details:-

  1. Tax Liability Outstanding i.e Rs 5,00,000/-.
  2. No of days for which the tax is delayed (30 days, we will not count 20th April)
  3. Interest Rate :- 18%

Thus, Interest on delay in Payment of GST will be Rs 7397/-(5,00,000 *18/100 *30/365)

2. Interest on Undue or Excess Claim of Input Tax Credit u/s 42 (10) by the recipient

The above interest deals with contravention u/s 42(10) of CGST/SGST Act.

A person registered under GST, who makes an undue or excess claim of Input tax credit under section 42(10)  shall pay interest on such undue or excess Input Tax Credit Taken by the taxpayer at such rate not exceeding 24% p.a or at such rate as may be specified by appropriate authority.

Section 42(10) read as under “The amount reduced from the output tax liability in contravention of sub-section(7) shall be added to the output tax liability of the recipient in his return of the month in which such contravention takes place and such person shall be liable to pay interest on the amount so added at the rate specified in sub-section(3) of Section 50”

3. Interest on Undue or Excess Reduction in Output Tax Liability u/s 43 (10) by the supplier

The above interest deals with contravention u/s 43(10) of CGST/SGST Act.

A person registered under GST, who makes an undue or excess claim, or on undue or excess reduction of the output tax liability under section 43(10)  shall pay interest on such undue or excess claim/reduction  at such rate not exceeding 24% p.a or at such rate as may be specified by appropriate authority

Section 43(10) read as under “The amount reduced from output tax liability in contravention of provisions of sub-section(7) shall be added to the output tax liability of the supplier in his return for the month in which such contraventions takes place and such supplier shall be liable to pay interest on the amount so added at the rate specified in sub-section (3) of section 50”.

4. Interest on Delay In Payment of Refund

The above interest deals with interest on delay by the GST officer in payment of the refund to the assessee.

If any tax(GST) that is ordered to be refunded under sub-section (5) of Section 54, is not refunded to the applicant within 60 days from the date of receipt of application under section 54(1), interest at the rate not exceeding 6% p.a or at such rate as may be specified from the date immediately after expiry of 60 days from the date of receipt of such application under section 54(1) till the date of the refund of the tax shall be paid.

5. Interest on Delay in Refund In Respect of Appeal

The above interest is governed by Section 54(12) read with Section 54(11). If as a result of appeal or further proceedings taxable person becomes entitled to the refund, then he shall also be entitled to interest @ 6% p.a. Section 54(12) read as under”. Where a refund is withheld under sub-section 11 of Section 54, the taxable person shall notwithstanding anything contained in Section 56, be entitled to interest at such rate not exceeding six percent as may be notified on the recommendation of the council, if as a result of the appeal or further proceedings he becomes entitled to refund”

6. Interest on Delay in Refund In Respect of Order Passed By Appellate Authority or Appellate Tribunal

Provision to Section 56 deals with the interest for delay in refund in case of orders passes by various appellate authority. The rate of interest is 9% p.a. Where any claim of refund arises from an order passed by an adjudicating authority or appellate authority or appellate tribunal or court which has attained finality and the same is not refunded within sixty days from the date of receipt of application filed consequent to such order, interest at such rate not exceeding 9 percent. As may be notified by the government on the recommendations of the council shall be payable in respect of such refund  from the date immediately after the expiry of the sixty days from the date of receipt of application till the date of refund.



To Subscribe