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Pankaj Tyagi
| Updated: 17 Nov, 2020 | Category: Goods and Service Tax, Latest News

Interest on the Late GST Payment would imposed on Net Cash Tax Liability

Interest on the Late GST Payment will be charged on Net Cash Tax Liability- CBIC

CBIC has rolled out some crucial directions on the interest on the late GST payment under the purview of the CGST Act, 2017 on 25/08/2020. The CGST Act has undergone several amendments this year. The government has put its best effort to assist the business owners pan India during this tough time. Given this, the government has been making a continuous amendment. 

Key Updates of Notification w.r.t Interest on the Late GST Payment

The recent amendment was done on account of interest charged on the late payment of GST. The following list exhibits the same. 

  • The interest on the late GST payment would not be charged on the gross tax liability. Instead, it will be charged on the Net Cash Tax Liability.
  • The changes have been in effect since 1st September 2020. This change has covered the ex-post facto with the previous regime. 
  • The interest rate of delayed filing of GSTR-3B for a business owner, whose yearly income is up to Rs 5 crore has been slashed down to 9% if a file by 30/09/2020. 
  • Previously, as per the GST law, 18% interest was imposed on late gross GST payment. But after the GST meeting held in March, the council decided to charged interest as a penalty for net tax liability instead of gross tax liabilities. 

However, the CBIC rolled out another update regarding the amendment which indicates that the interest for delayed payment of GST would be chargeable on net tax liabilities. The notification has been in an active state since 1st September 2020. 

Late fees For Nil Return filers

Name of the Act

Late fees for every day of delay

CGST Act

Rs 10

SGST Act

Rs 10

IGST Act

Rs 20

FOR GST ANNUAL RETURNS (GSTR-9)

Name of the Act Late fees for Delay
Central Goods and Services Act, 2017 Rs 100
State Goods and Services Act, 2017 (or) Unio territory Goods and Services Act, 2017 Rs 100
Total Late fees Rs 200

Significance of Finance Act under CGST Act     

Section 100 of the Finance Act, 2019[1] inserted a new condition to Section 50 of the CGST Act. The condition clearly indicates about the imposition of the taxes on the tax return filed after the due date. To be precise, it will be imposed on the part of the tax paid by debiting the electronic cash ledger. However, there is an exception to that. In case the return has been submitted after the initiation of the proceedings as per Section 73 or 74 for a given period, interest will be levied on the gross tax liability. 

Prior to the notification, the interest was supposed to be calculated on the total tax liability without adjusting the ITC, i.e. input tax credit accessible in the ledger for utilization. This results in increased cash out for the taxpayers. Presently, the GST portal is not equipped with features that allow auto-computation of interest. The obligation for calculating and declaring the interest is on the taxpayer itself.

Some taxpayers in the past had paid interest on the net liability rather than gross. Accordingly, the authorities rolled out updates in the past depending on the CBIC’s Chairman Direction. Up till now, Rs. 45,996 crore had been collected by the authority on account of interest imposed on late GST payment. In response to the notification, taxpayers decided to take legal assistance on the matter. 

How to Deposit Late fees?

  • The late fee is calculated by the GST portal without interfering with any of the functions while furnishing the returns. 
  • The late fee is paid in cash in electronic ledgers independently for SGST, CGST, and IGST. Taxpayers have to pay the late fee upfront to file the fresh GST return
  • A late fee for the given month includes the fees for the last month Imposed for the delay in return filing. Also, late payment or non-payment of GST lures interest.

Late Fees for GST Return as per the GST Act

  • All returns excluding yearly returns: Rs 50/day (Rs 25 CGST + Rs 25 SGST) of default up to a max of five thousand rupees.
  • Annual Returns: Rs. 200/day (Rs. 100 CGST + Rs. 100 SGST) of default up to a max of 0.25% of Turnover.

Interest under GST

Interest is applied to the delayed payment of GST liability. Every individual has to pay the interest even after successful completion of GST registration in case if him /her:-

  • Pays GST after the due date.
  • Claims excess ITC i.e. input tax credit
  • Reduces excess output tax liability

The following table manifests the interest rate which has to be paid in case of late filing of the GST return. 

Particulars Interest
Tax paid post due date 18% p.a.
Excess Input Tax Credit Claimed or excess reduction in Output Tax 24% p.a.

The calculation of the interest shall be done from the next day on which tax was due. For example, a taxpayer not paid the tax payment worth Rs 12000 for December 2018. The due date was 20th January 2018. If he opts to make the payment on 22nd Feb 2019, the interest for the delayed period would be estimated as Rs. 12000*33/365*18 = Rs 195

Conclusion

The Net GST liability can be measured by ITC from Gross GST Tax liabilities. Hence, the consideration of interest on gross tax obligations was raising the payment of businessmen. These variations can be pretty helpful for the individuals who are confronting a tough time due to this pandemic by reducing their payment obligation to a significant extend. Connect with CorpBiz for calculating interest on the late GST payment.

Read our article:Things you must know about GSTR-5 Filing: How to go about it?

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Pankaj Tyagi

Pankaj has a diverse experience of writing research papers, blog, and articles during his college time. Earlier, he was working as a tax consultant in a financial firm, but his interest in writing drives him to pursue a career in the writing field.

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