Section 50 - Interest on delayed payment of tax

Contents

Para

Topics

Section/Rules/N/C/O

50.0

Purpose of Section 50

NA

50.1

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

Section 50(1) & N No. 13/2017-Central Tax

50.1.1

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

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

50.1.2

In other cases, interest is payable on gross tax not paid on due date

Rule 88B(2)

50.1.3

Interest is payable from the next day of the due date

Section 50(2)

50.2

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

Section 50(3) read with Rule 88B(3)

50.2.1

Meaning of ITC wrongly availed and utilised

Explanation (1) to Rule 88B(3)

50.2.2

Meaning of date of utilisation of ITC

Explanation (2) to Rule 88B(3)

50.3

Miscellaneous Questions

NA

 

50.0 Purpose of Section

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The tax dues which are not paid within the stipulated time are liable to interest payment.

Hence section 50 provides for interest payable on late payment of tax.

 

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

Section 50(1)

Every person who is liable to pay tax but fails to pay tax or any part thereof to the Government within the period prescribed,

shall pay on his own, interest at such rate not exceeding 18%

as may be  notified by the Government, [18%]

for the period for which the tax or any part thereof remains unpaid.

Vide Notification No. 13/2017-Central Tax dt. 28-06-2017, 18% p.a. interest rate has been notified.

However, during COVID period, some relaxation were given vide above notifications.

Refer Proviso of above notifications for such relief.

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The payment of interest in case of belated payment of tax should be made voluntarily i.e. even without a demand.

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The interest payable under this section shall be debited to the Electronic Liability Register.

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The liability for interest can be settled by adjustment with balance in Electronic Cash Ledger but not with balance in electronic credit ledger.

Question & Answer

 

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

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

Where supplies made during a tax period and declared in the return for the said period and said return is furnished after the due date as per section 39,

except where such return is furnished after commencement of any proceedings u/s 73 or 74 in respect of the said period,

interest on tax payable in respect of such supplies shall be calculated at 18% rate 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.]

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Interest shall be payable only for tax which is paid through electronic cash ledger.

Interest is not payable for tax which is paid through electronic credit ledger.

Question & Answer

 

50.1.2 In other cases, interest is payable on gross tax not paid on due date

Rule 88B(2)

In all other cases, where interest is payable u/s 50(1),

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 18% rate as notified u/s 50(1).

 

50.1.3 Interest is payable from the next day of the due date

Section 50(2)

Interest u/ss (1) shall be calculated, in such manner as may be prescribed, from the day succeeding the day on which such tax was due to be paid.

 

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

[2][Section 50(3) read with Rule 88B(3)

Where ITC has been wrongly availed and utilised,

RP shall pay interest on such ITC wrongly availed and utilised, at such rate not exceeding 24%

As may be notified by government [24%]

for the period starting from the date of utilisation of such wrongly availed ITC till the date of reversal of such ITC or payment of tax in respect of such amount,

at 24% rate as notified u/s 50(3)]

Question & Answer

 

50.2.1 Meaning of ITC wrongly availed and utilised

Explanation (1) to Rule 88B(3)

For the purposes of this sub-rule, —

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

 

50.2.2 Meaning of date of utilisation of ITC

Explanation (2) to Rule 88B(3)

For the purposes of this sub-rule, —

the date of utilisation of such ITC shall be taken to be,

(a) due date of return u/s 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 ITC 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 ITC wrongly availed, in all other cases

 

50.3 Miscellaneous Quesitons

Question & Answer

 

[1] Proviso substituted by Section 112 of The Finance Act 2021 dt. 28-03-2021 wef 01-07-2017 and made effective from 01-06-2021 by Notification No. 16/2021-Central Tax dt. 01-06-2021.

[2] Substituted by section 111 of the THE FINANCE ACT, 2022 wef 01-07-2022 and made effective by Notification No. 09/2022-Central Tax dt. 05-07-2022.

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