Goods and Services Tax (GST) is a comprehensive indirect tax levied on the supply of goods and services in India. GST has replaced all the previous indirect taxes levied by the central and state governments. The introduction of GST has simplified the indirect tax system, but it has also brought about some changes in the tax compliance procedures. In this blog, we will be discussing Interest on Delayed Payment/ Reversal of ITC of GST.
Interest on Delayed Payment is a penalty for not paying the GST dues on time. As per section 50(1) of the Central Goods and Services Tax (CGST) Act, every registered person who fails to pay the tax due within the prescribed time shall be liable to pay interest at the rate of 18% p.a. The interest is calculated from the day after the due date of payment till the date of actual payment.
The interest liability arises when a taxpayer fails to pay the tax due within the due date. The due date for payment of GST is based on the type of tax liability, such as monthly or quarterly. The due date for filing the monthly return is 20th of the next month, while the due date for filing the quarterly return is 18th of the month succeeding the quarter.
For instance, if a taxpayer has a GST liability of INR 50,000 for the month of September 2021 and fails to pay the tax within the due date, he will be liable to pay interest at the rate of 18% p.a. The interest will be calculated from 21st October 2021 till the date of actual payment.
Input Tax Credit (ITC) is the tax paid on the purchase of goods or services used for business purposes. The ITC can be used for the payment of GST liability. However, there are some conditions for availing ITC, such as possession of valid tax invoices, proper filing of returns, and compliance with other provisions of the GST Act.
If a registered person has availed ITC on the basis of fraud, willful misstatement, or suppression of facts, then he is liable to pay a penalty. As per section 73 of the CGST Act, if any person has received the ITC in excess of what he is entitled to, then he shall be liable to pay interest at the rate of 18% p.a. from the date of availing of the ITC till the date of its reversal.
This means if a taxpayer avails ITC on the basis of fake invoices or without actual receipt of goods or services, he is liable to pay the ITC amount along with interest at the rate of 18% p.a.
Interest on Delayed Payment/ Reversal of ITC of GST is a penalty for non-compliance with the GST provisions. It is advisable to file the GST returns on time and pay the tax dues within the due date to avoid the interest liability. Similarly, proper compliance with the GST provisions is necessary for availing ITC to avoid the penalty.
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