CGST §50 — Interest on delayed payment of tax

Interest @ 18% p.a. is payable on tax NOT paid by the due date (computed on NET cash component only — the amount paid through electronic cash ledger, not amount set off against ITC). Interest @ 24% p.a. on EXCESS ITC CLAIMED (i.e. wrongly availed and utilized). Interest is automatic — payable without notice.

Key points

• §50(1) requires every person who is liable to pay tax in accordance with the provisions of the Act and Rules, but FAILS TO PAY the tax or any part thereof to the Government within the period prescribed, to pay INTEREST at 18% per annum (Notification 13/2017-CT) for the period from the day succeeding the due date until the date of payment.
• PROVISO (Finance Act 2021 retrospective from 1-Jul-2017): interest is payable on the NET CASH LIABILITY — i.e. the tax paid by debiting the ELECTRONIC CASH LEDGER, NOT on the portion set off against the electronic CREDIT ledger (ITC).
• This settled the long-running dispute and aligned GST with the principle that interest follows the time value of money actually withheld.
• §50(3) [substituted by FA 2022 effective 5-Jul-2022]: where ITC has been WRONGLY AVAILED AND UTILISED, interest is payable at 24% p.a.
• on such wrongly availed and utilised ITC for the period from the date of utilisation to the date of reversal of credit or payment of tax.
• PRE-AMENDMENT: §50(3) charged 24% only when ITC was wrongly availed AND utilised but did not allow netting with cash payment — some Tribunals had read this expansively.
• The FA 2022 substitution restricts 24% to the specific 'wrongly availed AND utilised' scenario;
• mere wrong availment without utilisation (i.e. ITC still sitting in credit ledger, not yet set off) does not attract interest per Rule 88B(3).
• Interest under §50 is automatic — no show-cause notice required;
• recoverable as arrears.

Reference: §50 CGST Act 2017 read with Rule 88B + Notification 13/2017-CT