Late fee & interest applicable on GST


GST stands for Goods and Services Tax, and it is an indirect tax levied on the supply of goods and services in India. It is a comprehensive, destination-based tax that was introduced in India on 1st July 2017, to replace the multiple taxes that were levied by the central and state governments.

GST has simplified the tax structure and replaced various indirect taxes such as Central Excise Duty, Service Tax, Value Added Tax (VAT), Entry Tax, Octroi, and other state-level taxes. It is easier for businesses to comply with tax regulations.

The implementation of GST has brought in a number of benefits, such as reducing the cascading effect of taxes, eliminating tax evasion, increasing tax compliance, and promoting the ease of doing business in India.

Why filing GST returns on time is important?

  1. Avoiding late fees & penalties: Filing GST returns after the due date attracts late fees and penalties. Late fees imposed at Rs. 50 per day for each return up to a maximum of Rs. 5,000. By filing returns on time, taxpayers can avoid incurring these additional expenses.
  2. Input Tax Credit (ITC): Timely filing of GST returns is essential to claim the input tax credit (ITC). If GST returns are not filed on time, taxpayers may not be able to claim the eligible ITC, which can lead to a higher tax liability.
  3. Compliance: Filing GST returns on time ensures that taxpayers are compliant with GST regulations. Non-compliance can lead to legal repercussions such as fines and penalties, which can negatively impact a business’s reputation.
  4. Credit Score: To maintain a good credit score, it is very important to file GST on-time. Failing on returns or defaulting on payments can affect a business’s credit score, which can make it difficult for them to access loans or credit facilities in the future.
  5. Avoiding Legal Issues: Timely filing of GST returns ensures that businesses are compliant with tax regulations, thereby reducing the risk of legal issues and tax audits.

Late fees and interest are levied on taxpayers for delayed filing or non-filing of GST returns. The specific provisions regarding late fees and interest are mentioned under the Goods and Services Tax (GST) Act, 2017.

Late Fees: If a taxpayer fails to file their GST return on or before the due date, they are liable to pay a late fee of Rs.50 per day for each return (i.e., CGST+SGST/UTGST+IGST) up to a maximum of Rs.5,000. However, for taxpayers with no outward supplies, the late fee is reduced to Rs.20 per day per return, up to a maximum of Rs.2,000.

Interest: In addition to the late fees, interest is also charged on the outstanding tax liability if the GST return is filed after the due date. The interest is calculated at the rate of 18% per annum, calculated on the outstanding tax liability from the due date of filing the return until the date of payment.

It is important to note that the interest is calculated on the total outstanding tax liability, including any tax that was not paid or short-paid, but not including any ITC claimed. In case of excess ITC claimed, interest is levied on the amount of excess credit claimed.

Therefore, taxpayers are advised to file their GST returns on or before the due date to avoid late fees and interest charges.