Interest rates under GST Act, Interest Provisions under GST Regime

Interest rates under GST Act, Interest Provisions under GST Regime. It details interest rates applicable in GST under various scenarios. Every person liable to pay tax and fails to pay the same on due date , shall pay interest on unpaid amount at the rate as prescribed from the due date of payment of tax to the date of payment. Interest shall be paid to the account of central or State Government. check out complete for Interest Provisions in GST Act 2017.

Interest rates under GST

Interest on delayed payment of tax {section 50}

 Interest in payable under 3 circumstances: –

  • 50(1): – Delay in payment of tax, in part or in full.
  • 50(3): – Undue or excess claim of input tax credit under section 42(10)
  • 50(3): – Undue or excess reduction in output tax liability under section 43(10)

Section 50(1): –

Any person who is liable to pay tax under this act but fails to pay tax or any part of tax to the govt. within prescribed period (Last day on which return is to be filled). He shall be liable to pay interest @ 18% from the day succeeding the day on which tax was due to be paid.

Interest on excess input tax credit claimed

Case 1

Where ITC claimed by the recipient on inward supply: –

  • Is in excess of tax declared by the supplier for such supply, or
  • Such supply is not reflected in his valid return.

Than dept. shall communicate the discrepancy to both persons. {Section 42(3)}.

Case 2

Duplication of claim of input tax credit. Dept. shall send communication to the recipient. {Section 42(4)}

Consequences

Case 1

Scenario 1

The supplier does not rectify the discrepancy in the return for the month in which discrepancy is communicated. Than the amount shall be added to the output tax liability of the recipient in the return of succeeding month. {Section 42(5)}

Recipient shall, on added amount, be liable to pay interest under section 50(1) @ 18% from the date of availing credit till the date of corresponding addition. {Section 42(8)}

Scenario 2

If supplier declares the details of invoice or debit note in his valid return within specified time as per section 39(9). The recipient shall be entitled to reduce such amount from his output tax liability. {Section 42(7)}

Time limit under section 39(9): –

  • Due date of furnishing return for September month (i.e. 10th October)
  • Due date of furnishing return for 2nd quarter following the end of financial year (i.e. 18th October)
  • Actual date of furnishing annual return.

Whichever is earlier

Where reduction is accepted: – Above interest shall be refunded to recipient by crediting it to his electronic cash ledger. {Section 42(9)}

Where reduction not accepted: –  It shall be added to his output tax liability in return for the month in which contravention takes place. And recipient shall be liable to pay interest @ 24% under section 50(3) on such amount so added. {Section 42(10)}

Case 2

The amount claimed as input tax credit that is found to be in excess on account of duplication of claims shall be added to the output tax liability of the recipient in his return for the month in which duplication is communicated. {Section 42(6)}

Recipient shall be liable to pay interest on such amount under section 50(1) @ 18% form the date of availing credit till the date of such addition. {Section 42(8)}

Author – Anirudh Yadav

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