GST: Everything to Know about Interest Calculation under Section 50 including Illustrations

Government has finally notified and made applicable Section 50(3) of CGST Act along with Rule 88B with effect from 1st July, 2017 to put to rest all the ambiguities with regards to calculation of interest under GST.

Therefore, in this article we will try to explain final position of Law with regards to calculation of interest under various conditions especially divided into three main categories with the help of illustrations:

1) Late Filing of GSTR-3B


Commentary


In case where filing of GSTR-3B has been delayed, interest will be calculated at the rate of 18% for Cash Portion only (i.e. amount of GST paid in cash in that particular return) for the period of delay (i.e. Actual Filing of Return minus Due Date of GSTR-3B).


Illustration



Relevant Legal Provisions (Provided in the End: Click the Link)


2) Short/Delay Payment of GST


Commentary


When there is delay in payment of GST or Short Payment of GST and this Short Paid GST has either been paid on its own or on finding by the Department, in each case, interest has to be calculated at the rate of 18% for the period of delay in Payment of GST. (This is Irrespective of the fact that ITC was available or not in the Credit Ledger).


Illustration




Relevant Legal Provisions (Provided in the End: Click the Link)



3) Wrongful Availment of ITC


Commentary

In case of wrongful availment of ITC, interest at the rate of 18% is to be calculated only on the utilised portion from the date of utilisation till the date of reversal of such wrongful ITC.


Illustration








Relevant Legal Provisions (Provided in the End: Click the Link)


Legal Provisions ( Late Filing of GSTR-3B)


Rule 88B (1) read with Proviso to Section 50(1)

In case, where the supplies made during a tax period are declared by the registered person in the return for the said period and the said return is furnished after the due date in accordance with provisions of section 39, except where such return is furnished after commencement of any proceedings under section 73 or section 74 in respect of the said period, the interest on tax payable in respect of such supplies shall be calculated on the portion of tax which is paid by debiting the electronic cash ledger, for the period of delay in filing the said return beyond the due date, at such rate as may be notified under sub-section (1) of section 50.

Legal Provisions ( Short Payment/Delay in Payment of GST)


Section 50(1):

Every person who is liable to pay tax in accordance with the provisions of this Act or the rules made thereunder, 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, on his own, interest at such rate, not exceeding eighteen per cent., as may be notified by the Government on the recommendations of the Council:


Rule 88B (2):

In all other cases, where interest is payable in accordance with sub section (1) of section 50, the interest shall be calculated on the amount of tax which remains unpaid, for the period starting from the date on which such tax was due to be paid till the date such tax is paid, at such rate as may be notified under sub-section (1) of section 50.

Legal Provisions (Wrongful Availment of ITC)

Section 50(3)

“(3) Where the input tax credit has been wrongly availed and utilised, the registered person shall pay interest on such input tax credit wrongly availed and utilised, at such rate not exceeding twenty-four percent as may be notified by the Government, on the recommendations of the Council, and the interest shall be calculated, in such manner as may be prescribed.”.

Rule 88B(3)

In case, where interest is payable on the amount of input tax credit wrongly availed and utilised in accordance with sub-section (3) of section 50, the interest shall be calculated on the amount of input tax credit wrongly availed and utilised, for the period starting from the date of utilisation of such wrongly availed input tax credit till the date of reversal of such credit or payment of tax in respect of such amount, at such rate as may be notified under said sub-section (3) of section 50.

Explanation. —For the purposes of this sub-rule, —

(1) input tax credit wrongly availed shall be construed to have been utilised, when the balance in the electronic credit ledger falls below the amount of input tax credit wrongly availed, and the extent of such utilisation of input tax credit shall be the amount by which the balance in the electronic credit ledger falls below the amount of input tax credit wrongly availed.

(2) the date of utilisation of such input tax credit shall be taken to be, —

(a)the date, on which the return is due to be furnished under section 39 or the actual date of filing of the said return, whichever is earlier, if the balance in the electronic credit ledger falls below the amount of input tax credit wrongly availed, on account of payment of tax through the said return; or

(b)the date of debit in the electronic credit ledger when the balance in the electronic credit ledger falls below the amount of input tax credit wrongly availed, in all other cases.


Note: Best Efforts have been made to interpret the Law and Rules thereunder; however it is advised that before taking any decision, please consult with your Tax Adviser. Fab Gyan will not be responsible in any matter whatsoever.


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