Applicability of Interest Under GST

Interest is a significant element of GST taxation that can impact businesses in various ways. In this article, we will explore the applicability of interest under GST and how it works.Interest under GST is levied on the delayed payment of tax, non-filing or late filing of returns, and excess credit claimed. The rate of interest is usually 18% per annum, computed on a monthly basis. The interest amount is calculated based on the amount of tax that is not paid or filed on time.One of the primary reasons why interest is levied is to discourage businesses from delaying payments or returns. It is also meant to compensate the government for the loss of revenue due to delayed payments or non-filing of returns.

The applicability of interest under GST can be categorized as follows:

1. Delayed payment of tax:

Interest is levied on delayed payment of tax by a registered dealer. The interest is calculated from the due date of payment of tax till the date of actual payment. The interest rate is 18% per annum, calculated on a monthly basis.

2. Non-filing or late filing of returns:

A registered dealer is required to file returns on time. In case of non-filing or late filing of returns, interest is levied on the amount of tax that is unpaid. The interest rate is 18% per annum, calculated on a monthly basis.

3. Excess credit claimed:

A registered dealer can claim input tax credit (ITC) based on the invoices received. However, if the credit claimed is in excess of the actual tax liability, interest is levied on the excess amount. The interest rate is 18% per annum, calculated on a monthly basis.

It is important to note that interest under GST is not levied on the following cases:

1. Tax payable on reverse charge mechanism (RCM)

2. Interest on delayed payment of tax collected by the supplier but not deposited to the government

3. Interest on delayed payment of tax due to reasons beyond the control of the taxpayer, such as natural calamities, strikes, or lockoutsIn conclusion, interest is an essential aspect of GST taxation that can significantly impact businesses.

Understanding the applicability of interest under GST can help businesses plan their finances efficiently and avoid unnecessary interest payments. It is always advisable to pay taxes on time and file returns within the due date to avoid interest payments and legal consequences.