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.

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.

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

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

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

[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.]

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

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).

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.

[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

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.

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

Question & Answer