🔹 Introduction

GST law imposes interest and late fees on taxpayers for delays or errors in return filing and tax payment. These charges are automatic and cannot be waived unless notified by the government. For businesses, understanding the rules is crucial to avoid unnecessary financial burden and GST notices.

(Reference: Sec. 47 & Sec. 50 of CGST Act, CBIC notifications & circulars till 2025)

🔹 Interest under GST (Sec. 50)

✅ When Applicable

• Delay in payment of GST liability.

• Wrong or excess ITC claim.

• Excess reduction of output tax liability.

✅ Rate of Interest

• 18% p.a. → On delayed payment of GST liability.

• 24% p.a. → On undue or excess ITC claims and undue reduction of output tax liability.

✅ Calculation

Interest = (Tax amount × Days of delay × Rate) ÷ 365

📌 Note: Payable only on net cash liability (after ITC adjustment), not on gross liability.

🔹 Late Fees under GST (Sec. 47)

✅ For GSTR-3B & GSTR-1

• ₹50 per day (₹25 CGST + ₹25 SGST).

• Maximum: ₹5,000 per return.

✅ For NIL Returns

• ₹20 per day (₹10 CGST + ₹10 SGST).

✅ For Annual Returns (GSTR-9)

• ₹200 per day (₹100 CGST + ₹100 SGST).

• Capped at 0.5% of turnover in state/UT.

✅ For GSTR-9C

• Similar to GSTR-9 late fee structure.

🔹 Recent Relief & Amnesty Schemes

• 2023 Amnesty Scheme: Reduced late fees for pending GSTR-4, GSTR-9, GSTR-10 filings.

• 2024 Notification: Rationalized late fees for small taxpayers.

• 2025: Businesses must check for new budget updates/notifications for relief measures.

🔹 Step-by-Step Examples

Example 1: Delay in GSTR-3B Payment
A trader’s liability = ₹1,00,000 (cash). Filed 20 days late.
Interest = ₹1,00,000 × 20 × 18% ÷ 365 = ₹986.
Late fee = 20 × ₹50 = ₹1,000.
Total = ₹1,986.

Example 2: Excess ITC Claim
A manufacturer wrongly avails ITC of ₹2,00,000. Detected later after 30 days.
Interest = ₹2,00,000 × 30 × 24% ÷ 365 = ₹3,945.
Penalty may apply under Sec. 74A.

Example 3: NIL Return Delay
A service provider had no transactions but filed NIL GSTR-3B 15 days late.
Late fee = 15 × ₹20 = ₹300.

🔹 Common Mistakes

• Ignoring auto-calculated interest on portal.

• Assuming ITC errors won’t attract higher interest.

• Filing returns late due to cash flow issues → leads to interest + late fee.

• Confusing late fee (fixed per day) with interest (percentage-based).

🔹 Best Practices

• ✅ Always file GSTR-3B on or before due date.

• ✅ Reconcile ITC monthly with GSTR-2B to avoid undue claims.

• ✅ Maintain a GST calendar for due dates.

• ✅ Keep a buffer cash balance for GST payment.

• ✅ Review CBIC notifications for any relief schemes.

🔹 FAQs

Q1. Is interest payable even if ITC balance is available?
➡️ No, only on net cash liability.

Q2. Can late fee be waived?
➡️ Yes, government may issue amnesty/relief notifications.

Q3. Is interest auto-calculated on GST portal?
➡️ Yes, portal computes payable interest.

Q4. What if return is filed but tax is unpaid?
➡️ Interest applies until tax payment made.

Q5. Is late fee applicable for GSTR-2B mismatch?
➡️ No, but may invite notice under Sec. 74A.

🔹 Conclusion

Interest and late fees are strict and non-discretionary under GST. Non-compliance not only results in extra cost but also triggers notices. Businesses must file returns on time, pay tax promptly, and avoid wrong ITC claims.

📌 Need professional help in GST return filing, interest calculation, or late fee waiver schemes?
Contact Tech-Tax Solutions – Quality, Trust & Expertise in Ghaziabad, Noida & Delhi.