50.1 Interest @18% p.a. is payable on late payment of tax

Quesiton-1 [ICMAI-I-D18-1(d)(iv)-1]

For delayed payment of GST, interest is payable at _____ % p.a.

50.1.1 If return is furnished after due date, interest is payable only tax paid through EcaL

Question-1 [ICAI-I-N19-O-9b-4] [Intt on tax due to late furnishing of return]

Mr. Alok, filed GSTR 3B for Jan, 2020 on 15^th April, 2020.

Due date to file the said GSTR3B = 20^th Feb, 2020.

The amount of net GST payable, in Cash i.e. Electronic Cash Ledger = Rs.36,500 which was paid on 15^th April, 2020.

Briefly explain the related provisions and compute the amount of interest payable under the CGST Act, 2017 by Mr. Alok. Ignore the effect of leap year, if applicable in this case.

Answer

Interest is payable in case of delayed payment of tax @ 18% per annum from the date following the due date of payment to the actual date of payment of tax.

Thus, the amount of interest payable by Mr. Alok is as under:-

Period of delay = 21st Feb, 2020 to 15th April, 2020 = 54 days

Hence, amount of interest = Rs.36,500 x 18% x 54/365 = Rs.972

Quesiton-1A [ICMAI-F-J19-1(iv)-2]

A registered supplier, who regularly files monthly GST return, has paid GST pertaining to the month of June, 2018 on 10-07-2018. The interest payable for delayed remittance of GST is

(A) Rs.710 (B) Rs.355 (C) Rs.473 (D) None of these

Question-2 [ICMAI-F-J19-7(a)-7] [ICMAI-F-D18-5(a)(ii)-5]

Radhakrishna, a registered person under GST, has furnished the following details for the month of Aug, 2018;

The GST was paid on 10^th Oct, 2018. Compute the interest payable for the delayed payment.

Note: The IGST rate for the goods dealt with is 18%

Answer

Due date of Aug Return = 20^th Sep

Actual date of filing of return = 10^th Oct

Interest payable = Rs.36,000*18%*20/365 = Rs.355

Note: ITC on goods taken for personal purpose is not available u/s 17(5)

Question-3 [ICAI-I-Ch9-Ill3] [Intt on short payment of Tax, if return is furnished on or before due date]

M/s ABC Ltd., have filed their GSTR3B for the month of July, 2020 within the due date u/s 39 i.e. 20.08.2020.

Post filing of the return, the RP has noticed during Sep 2020 that tax dues for the month of July, 2020 have been short paid for Rs.40,000.

M/s ABC Ltd., has paid the above shortfall of Rs.40,000, through GSTR3B of Sep 2020, filed on 20.10.2020 [payment through Cash ledger – Rs.30,000 and Credit ledger Rs.10,000].

Examine the Interest payable under the CGST Act, 2017.

What would be your answer if, GSTR3B for the month of July 2020 has been filed belatedly on 20.10.2020 and the self-assessed tax of Rs.40,000/- has been paid on 20.10.2020 [payment through electronic cash ledger – Rs.30,000 and electronic credit ledger Rs.10,000]

Notes:

• There exists adequate balance in Electronic Cash & Credit ledger as on 31.07.2020 for the above short fall
• No other supply has been made nor tax payable for the month of July, 2020 other than Rs.40,000/- missed out to be paid on forward charge basis
• Ignore the effect of leap year, if applicable in this case.

Answer

Interest is payable u/s 50 of the CGST Act, 2017 in case of delayed payment of tax @ 18% per annum from the date following the due date of payment to the actual date of payment of tax.

As per proviso to sub-section (1) of Section 50, interest is payable on the net tax liability paid in cash, only if the return to be filed for a tax period u/s 39, has been filed after the due date to furnish such return.

In the above scenario, M/s ABC Ltd., has defaulted in making the payment for Rs.40,000 on self-assessment basis in the return for the month of July, 2020. Accordingly, interest is payable on the gross liability and proviso of sub-section 50(1) shall not be applicable.

Thus, the amount of interest payable by M/s ABC Ltd., is as under:-

Period of delay = 21st August, 2020 to 20th October, 2020 = 60 days

Hence, amount of interest = Rs.40,000 x 18% x 60/365 = Rs.1,184

Alternatively, if M/s ABC Ltd., have filed the return for the month of July,2020 on 20.10.2020, beyond the stipulated due date of 20.08.2020 and if the self-assessed tax for July, 2020 has been paid on 20.10.2020, Interest under proviso to Section 50(1) shall be payable on the tax paid through Electronic Cash Ledger only.

Hence Interest is payable from 21st August 2020 till 20th October 2020 = 60 days

Amount of Interest = Rs.30,000 x 18% x 60/365 = Rs.888

Quesiton-3A [ICAI-I-N21-7(b)-5]

PQR Ltd., have filed their GSTR-3B return for the month of August, 2020 within the due date i.e. 20.09.2020. It was noticed in October, 2020 that tax dues for the month of August, 2020 have been short paid by Rs.10,000. The shortfall of Rs.10,000 was paid through cash ledger and credit ledger amounting to Rs.7,500 and Rs.2,500 respectively while filing GSTR-3B of October, 2020 which was filed on 20.11.2020.

(i) Examine and compute the interest payable if any under the CGST Act, 2017.

(ii) What would be your answer if, GSTR-3B for the month of August 2020 had been filed belatedly on 20.11.2020 as above.

Note: Ignore the effect of the leap year. Electronic cash ledger and credit ledger carried sufficient balance for the above shortfall.

Answer

In case of delayed payment of tax, interest is payable @ 18% per annum from the date following the due date of payment to the actual date of payment of tax. However, interest is payable only on the short-paid tax which is paid through electronic cash ledger if return under section 39 is furnished after the due date.

(i) In the given case, PQR Ltd. has furnished the return for August 2020 by the due date. Hence, interest is payable on the entire amount of short payment of Rs.10,000, as under:

= Rs.10,000×18%×61/365 = Rs.300.82 or 301(rounded off)

(ii) If PQR Ltd. has furnished the return for August 2020 after the due date, interest is payable only on the short payment which is paid through electronic cash ledger, i.e.  Rs.7,500, as under:

= Rs.7,500×18%×61/365 = ` 225.62 or 226 (rounded off)

50.2 Interest rate = 24% on wrong availment and utilization of ITC

Question-1 [ICSI-E-J18-O-89-1]

A taxable person who makes an excess claim of input tax credit or excess reduction in output tax liability shall pay interest at such rate not exceeding :

(A) 18%; (B) 24%; (C) 20%; (D) 21%

Answer

Under old provision 24%

But under new provision, 24% on wrong ITC and 18% in excess reduction in output tax

Question-2 [ICSI-E-D21-O-92-1]

As per section 50 of the CGST Act, 2017 interest not exceeding........calculated from the next day of the due date has to be paid for delay of payment. Interest on undue or excess claim of ITC or excess reduction in output tax liability shall not be exceeding ....................

(A) 24%, 18% (B) 18%, 24% (C) 12%, 18% (D) 18%, 12%

Question-2A [ICSI-E-J21-O-90-1]

What will be maximum rate of interest, if a taxable person who makes an undue or excess claim of input tax credit or undue or excess reduction in output tax liability ?

(A) 12% (B) 18% (C) 24% (D) 36%

50.3 Miscellaneous Question & Answer

Quesiton-1 [ICAI-I-M18-12a-5]

When shall the interest be payable by a registered person and what is the maximum rate of interest chargeable for the same?

Answer

(a) Interest is payable in the following cases:

• failure to pay tax, in full or in part within the prescribed period,

• undue or excess claim of input tax credit,

• undue or excess reduction in output tax liability.

The maximum rate of interest chargeable for the same is as under

(a) 18% p.a. in case of failure to pay full/part tax within the prescribed period

(b) 24% p.a. in case of undue or excess claim of input tax credit or undue or excess reduction in output tax liability.

Question-1A [ICMAI-I-D19-7(a)-5]

Explain when tax payer can be levied with Interest on late payment of tax.