Interest on Late Payment of GST To Be Calculated on Gross Tax Liability

Interest on late payment of GST
(Last Updated On: February 23, 2022)

Late on your GST payments? The Central Board of Indirect Taxes (CBIC) will now calculate interest on late payment of GST using Gross Tax Liability, across India.*

Taxpayers who filed their GST returns in GSTR-3B forms should pay interest on the total amount of tax liability shown in the form.

Why did this new rule pass?

The CBIC’s recent directive to begin recovering over  Rs. 46,000 crores of unpaid interest on delayed GST payment had taxpayers uneasy. The CBIC, in a series of tweets, clarified that the Centre, as well as state governments, prospectively amended the GST Act to collect interest on the gross tax liability of the taxpayers instead.

Interest on late payment of GST calculated?

According to taxscan, The GSTR-3B Tax Liability notice stated section 50 (1) of the Central Goods and Service Tax (CGST) Act and stated that the provision is very clear on the tax liability in this regard.

According to eztax, Interest on late payment of GST needs to be paid by every tax-paying business that:

  • Pays GST after the due date
  • Claims excess Input Tax Credit.
  • Reduces excess Output Tax Liability.

You pay GST at the time of filing GSTR-3B every month and GSTR-4 for quarterly basis. , GST is not payable on the interest amount, as the Interest amount is separately charged. Read here to know more about how GST late fees work for your business.

Scenario Interest Per Annum
GST paid after the due date 18%
Excess ITC Claimed or excess reduction in Output Tax 28%

How to prevent late payment of GST:

Claiming the right amount of Input Tax Credit: 

Input Tax Credit (ITC) allows the taxpayers to claim credit for the taxes paid on the purchase. ITC is important in the functioning of GST. It reduces the tax burden on the end customer and also helps the seller get back money eventually reducing the price of goods and services.

And for this, you need GST compliant invoices. 

GST e-invoicing: 

The introduction of GST e-invoicing last month is to encourage two major areas – transparency and proof. This is for both businesses and the Government to benefit from. E-invoicing of GST resolves and plugs a major gap in data reconciliation under GST to reduce mismatch errors. So when you claim for ITC, you have enough proof.

If your business is new to the complicated and ever dynamic world of GST, we have a complete online course curated, especially for you!

*The states of Telangana and West Bengal are in the process of amending their state GST Acts.


1 comment
  1. Hi Chethna,

    Thank you for publishing about Interest on Late Payment of GST To Be Calculated on Gross Tax Liability with a detailed explanation note on Tax with video.

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