Interest on Late Tax Payment under GST

Late Tax Payment

Under GST, interest is liable to be paid when there is a delay in payment. Provisions have been made for interest to be paid, when there is a lapse by the tax payer as well as by the Department. In this blog, let us understand the scenarios where interest is applicable.

Interest on late payment of tax by tax payer

The two scenarios where a tax payer will be liable to pay interest are:

  1. Delayed payment of tax
  2. Input tax credit has been claimed in excess or where it was not eligible to be claimed/ Tax liability has been shown to be less than the actual

Interest rates

ScenarioInterest rate per annum
Delayed payment of tax18%
ITC claimed in excess or incorrectly/ excess reduction in output tax liability24%

Interest to be paid by the department

The three scenarios where the Department is liable to pay interest on delayed payment to a tax payer are

  1. Refund of tax has been withheld from a person on account of an appeal or proceeding but which is later found to be eligible to be paid
  2. Refund of tax has not been given to a person within 60 days from the date of receipt of application for refund
  3. Refund ordered by an adjudicating authority or Appellate Authority or Appellate Tribunal or court has not been paid to a person within 60 days from the date of receipt of application for refund.

Interest rates

ScenarioInterest rate per annum
Refund has been withheld6%
Refund has not been paid within 60 days6%
Refund rising from an order by an adjudicating authority or Appellate Authority or Appellate Tribunal or court has not been paid within 60 days9%

Hence, it is imperative for you as a tax payer, to avoid instances of interest payment. Default in payment of tax will also have an impact on your compliance rating. Timely and accurate compliance will help you to avoid unnecessary cash outflow and achieve a good compliance score.

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