Tips to Avoid Penalties on GST – Late Fees and Interest

At the time of drafting GST rules, the GST council settled not only on the tax rates on goods and services but also on the penalty on late payments for GST. Under the GST system, you might be wondering how interest on late payment work.

Order of GST Payment

You should have a fair knowledge about the order of GST Payment before knowing the interest on GST late payment.

Every time a taxpayer pays GST, the taxpayer’s electronic-cash-ledger is credited. And the accessible credit in the cash ledger is used to settle the liability present in such taxpayer’s liability ledger. However, in a scenario where the cash ledger does not contain sufficiently credit, the order given for GST Payment shall be followed:

1. Previous tax period dues shall be settled.
2.  Current tax period dues shall be settled.
3. The payable amount under GST shall be adjusted.

Interest on GST Late Payment

In general, an interest of 18% annum applies to any late payment of GST.  If a taxpayer is found to have stated wrong GST Output tax liability, then 24 % interest on such payment is applicable. In addition, the penalty may also be levied for incorrect filing of GST returns.

Interest Payable on GST Refund

If any amount of interest is payable on the GST Refund by the government, then the following interest rate is applicable on the GST Refund:

Interest Payable on	Rate of Interest
Refund Appealed	6%
Delayed Payment	6%

As a scenario, if an order for a refund on the delayed payment was issued by the Appellate Authority or Tribunal, then the government is liable to pay interest of 9 % per annum on such a refund.

Penalty on Wrong GST Credit Use

The Tax Officer will send a notice consisting of the amount due along with the interest and penalty. If it is noticed that the GST benefit is misused to evade tax. To know the amount of interest applicable to the delayed payment of GST, please refer to the table below. And in the case of tax evasion a penalty may also be levied at the rate shown below:

Payment Time	Penalty Amount
Prior to show cause notice	15% of the due tax amount
Within 30 days of issuance of show cause notice	25% of the due tax amount
Within 30 days of communication of the order	50%  of the due tax amount
Other cases	100% of the tax amount

 Interest on GST Return

Late fees and interest rates are important factors of the GST payment and are paid by businesses in the case of delay in the submission or filing of GST returns.

 Late Fees under GST

The late fee is an amount charged for delay in filing GST returns, in accordance with GST law. This can be termed an overdue fine. If a GST Registered Business misses filing GST Returns within the due dates, some overdue fees are charged. The missed payment for the delay of filing NIL returns is also applicable. For example, no estimates in the GSTR-3B to declare for sales or purchases for the month of December 2018. Still, you need to file that return.

The amount should depend on the number of days of delay from the due date. GST returns in GSTR-3B will be filed on January 23rd, 2019, 3 days after the prescribed due date i.e. January 20th, 2019. Late fees will be calculated over 3 days and cash paid.

However, the GST portal is currently aligned to charge a late fee on GSTR-3B, GSTR-4, GSTR-5, GSTR-5A, GSTR-6, GSTR-8, GSTR-7 and GSTR-9 returns.

Amount of Late fees applicable

As per the Acts, both the CGST and the SGST Act prescribe the following late fees for intra-State supplies:

Name of the Act	Late fees for every day of delay
Central Goods and Services Act, 2017	Rs 100*
Respective State Goods and Services Act, 2017 (or) Union territory Goods and Services Act, 2017	Rs 100*
Total Late fees to be paid	Rs 200*

The law has set a maximum late Rs 5,000 fee. It means that the maximum late fees that can be charged by the government, in any situation, are Rs 5,000 each return that is filed under each Act.

Under the IGST Act, the late fee for inter-state supplies is approximately equal to the sum of fees prescribed under both the CGST and the SGST Act. The late fee, then, is:

Name of the Act	Late fees for every day of delay
Integrated Goods and Services Act, 2017	Rs 200*

The legislation has set a maximum late Rs 5,000 fee. It means that the maximum late fees that can be charged by the government, in any situation, are Rs 5,000 per return that is submitted under the Act.

For Nil Return filers
Name of the Act	Late fees for every day of delay
CGST Act	Rs 50
SGST Act	Rs 50
IGST Act	Rs 100

For example, a Taxpayer has filed GSTR-3B for the month of December 2017 (due date 20th Jan 2018) on 23rd January 2018.

Amount of late fees to be paid:

Rs. 50 per day  3 days = Rs. 150 (Rs. 75 CGST + Rs. 75 SGST)

If the above return was a return with ‘Zero’ tax liability then late fees would be:

Rs. 20 per day  3 days = Rs. 60 (Rs. 30 CGST + Rs. 30 SGST)
( Subject to change via CBEC notifications)

CBIC has notified a reduced amount of late fees for a delay in filing some GST returns for a temporary period as a relief measure for businesses having difficulties using the GST portal. It is as follows:

• For Intra-state supplies,

Name of the Act	Reduced Late fees for every day of delay
CGST	Rs 25
SGST	Rs 25
Total Late fees to be paid	Rs 50

• For Inter-state supplies,