Goods and Services Tax (GST) is a crucial component of the Indian taxation system. Understanding the interest applicable under GST is essential for businesses to ensure compliance and avoid penalties. This guide covers various aspects of GST interest, including calculation methods, applicable rates, interest on late payments, and recent waiver notifications.
What is GST Interest?
GST interest is the amount payable by taxpayers on delayed payments of GST dues. It is calculated based on the outstanding tax amount and the period of delay. The interest ensures timely compliance and acts as a deterrent against late payments.
GST Interest Calculation
The interest under GST is calculated using the following formula:
[ \text{Interest} = \frac{\text{Tax Payable} \times \text{Interest Rate} \times \text{Number of Days}}{365} ]
For example, if the tax payable is ₹20,000, the interest rate is 18% per annum, and the delay is 30 days, the interest payable would be:
[ \text{Interest} = \frac{20000 \times 18 \times 30}{365 \times 100} = ₹295.89 ]. You may use below calculator to Calculate the interest.
GST Interest Payment Calculator
GST Interest Rates
The interest rates under GST are specified by the government and may vary based on the nature of the delay:
- 18% per annum for delayed payment of tax.
- 24% per annum for undue or excess claim of input tax credit or reduction of output tax liability.
Interest for Late Payment of Tax
GST late payment with interest means an additional amount to be paid by the taxpayers if he fails to make the GST payment while filing GSTR 3B. For eg., your tax liability for the month of September 2018 is 1 lakh rupees. you file a return on or before 20th October 2018. Later, in the month of November, you come to know that the actual liability in the month of September was Rs. 1.20 lakh. This may be because you forgot to include one tax invoice with a liability of Rs. 20 thousand.
Therefore you need to pay interest on the late payment of tax of Rs. 20,000/- from 21.10.2018 to 19.11.2018 = 28 days.
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a)How to Calculate Interest for Late Payment of GST?
The current interest rate for gst late payment of tax is 18% per day. Therefore the formula is = (Rs. 20,000/- X 18) / 100 = 3600 per annum. Now calculate for 29 days = (3600 /365) x 29 = 286 /-. Therefore you need to pay Rs. 286/- as interest and Rs. 20,000/- as principal tax amount for making late GST payments.
Therefore you need to calculate interest on late payments as above and pay the government for making delays in payments.
b) GST Late Payment Interest Calculator
You may use our GST late payment interest calculator for free. This is an excel base interest calculator. you need to enter a number of days for interest calculation. Enter the principal tax amount you need to pay. Thereafter this utility will automatically calculate the total amount of interest you will have to pay.
You may download the Excel tool to calculate interest on the late payment of GST from the below link.
c) How to Calculate Interest for Reversal of Wrong Input Availed?
If you have availed wrong input tax credit under GST then you need to reverse it by paying Interest on it. Also, this is applicable even you availed excess ITC under Goods and Service Tax.
The current interest rate for reversing input tax credit is 24% per day. Therefore you need to pay interest for everyday delay from the date of its availing to the date of reversal. Let us see the calculation part.
Suppose you availed 1 lakh wrong ITC on 15.04.2018, which now you want to reverse. Let us assume that you are going to pay it on 20.11.2018. Now calculate the number of days from 15.04.2018 to 19.11.2018= 218 days.
First calculate interest for per Annum ( 1,00,000 x 24 )/ 100 = 24000 (365 days).
For 218 days it is = ( 24000/365) x 218 = 14334/- .
Therefore you need to pay Total (Rs.100,000/- + Rs.14334/-) = 114334/-
ITC Reversal Interest Calculator – Excel utility
Interest on Gross Vs Net Tax Liability
The gross tax liability is without deducting the available input tax credit. Whereas the net tax availability is the balance tax liability after reducing the available input tax credit in the credit ledger.
In the case of Megha Engineering And Infrastructures Ltd, the high court held that as per the existing Section 50 of the CGST Act the interest is applicable to the Gross Tax liability. This is because the Input tax credit is in the air until the customer files the return and claim such credit.
Further, In the 39th GST Council meeting, it is decided to charge interest on net tax liability w.e.f 01.07.2017. In this regard, the 1st provision is inserted in subsection 1 of section 50 of CGST ACT 2017. However, this provision is brought into force w.e.f from 01.09.2020 only, vide Notification No. 63/2020–Central Tax dt.25.08.2020. Also, a press release is issued dt. 26.08.2020 stating the recoveries of past period will not be made. Thus, the taxpayers are worried that they will still get the notices for past period as the press release does not give the instructions to the officers to do so.
Penalty under GST
GST law reserves the right to impose a penalty in certain cases. However, these cases include confiscation of goods or conveyance while the movement of goods. Also, Confiscation of goods in warehouse go-down, other premises or e way bill issues.
Similarly, the department may issue a notice to you for not furnishing GST returns. If you still do not file your return within time in the notice, then it may charge a penalty for the late filing of gst return 3b and other returns.
Conclusion
Understanding GST interest is vital for businesses to maintain compliance and avoid penalties. By staying informed about the calculation methods, applicable rates, and recent waiver notifications, businesses can manage their GST obligations effectively. Use online calculators to simplify the process and ensure timely payments to avoid interest liabilities.