As a GST registered business. you probably already know that under the GST regime in India, when you miss filing GST returns within their due dates, there are late fees and interest on GST late payment. This mechanism not only ensures that taxpayers file their returns and make payments within due dates, but also compliance GST rules and tax administration.

Taxpayers have to pay late fees and interest on GST in cash (i.e., cannot use ITC credits) making it important for you to understand the nature, causes, and amount that GST penalties can incur. Let’s dive in.

An Overview

GST late fees and interest on GST late payments are imposed when eligible businesses (i.e., businesses that meet GST registration threshold limit) do not register for GST or when registered businesses fail to file their monthly/quarterly or annual returns on time.

GST late fees:

• Meaning: A fixed penalty for missing filing GST returns or registering for GST
• Late fee charges: Varies based on return type, annual turnover limit, and duration of delay
• Business impact: GST legal issues and compliance

Interest on GST late payment:

• Meaning: A % interest charged on GST liabilities on late filing
• Interest rate: Usually charged at 18% p.a. on the outstanding tax amount (Note: Interest on excess ITC claimed is 24% p.a.)
• Business impact: Financial burden caused due to interest added

Late fees and interest penalties can further lead to challenges in cash flow, working capital and financial planning. It can also result in compliance pressure for non-compliance with GST rules.

Understanding interest on GST late payment

Interest on GST late payment is charged at usually 18% per annum on the tax amount, applicable post the due date on filing returns.

Calculation of GST interest on late payment:

Suppose a business (Company A) has an outstanding amount of ₹10,000 payable as GST. It hasn’t filed its returns in time and is 30 days late.

Interest on late fees will be calculated as:
= (Outstanding GST amount) x (18%/365) x (Number of days delayed)
= ₹10,000 x 18%/365 x 30
= ₹147.95 or ₹148 as interest payable (round-off)

Applicability Scenarios:

The GST late fees and interest payable varies based on the GST return type and the taxpayer. For instance, those who have opted for the GST Composition Scheme have to file returns quarterly and follow a different late fee structure than normal taxpayers, filing returns on a monthly basis.

Scenario 1: When supplies are being made within the same state (i.e., intra-state), GST late fees are applicable for CGST and SGST/UTGST.

Scenario 2: For supplies made between two or more states (i.e., inter-state), GST late fee is applicable for IGST.

Scenario 3: Those with NIL returns for a particular month/quarter also have to file returns, pending which late fees will be applicable (i.e., for GSTR-1 and GSTR-3B).

Below, we take the example of late fees for GSTR-1 to explain and calculate the late fees and interest payable.

GST late fee calculation:

For GSTR-1:

• Due date for filing monthly returns: It is 11th of the succeeding month (i.e., GSTR-1 for January 2023 must be filed by 11 February 2023)

• Per day late fee charge (regular taxpayers): Late fee is usually charged at ₹25 each for CGST and SGST taking the total to ₹50 per day

• Maximum late fees (regular taxpayers): ₹2,000 maximum late fees for businesses with up to ₹1.5 crores in annual turnover; or ₹5,000 maximum late fees for businesses with up to ₹5 crores in annual turnover; ₹10,000 maximum late fees for business with over ₹5 crores in annual turnover

• Businesses with NIL returns: Late fees stands at ₹20 per day in total, with ₹10 each for CGST and SGST; Maximum late fees of ₹500 (i.e., ₹250 each for CGST and SGST)

Now, if Company A has filed its January GSTR-1 on 21 February 2023 instead of 11 February 2023, there will be 10 days late fees charged.

i.e., Late fee charges = Total late fees x Nos. of days of delay

Interest on late fees:

If interest on late fees is charged, it will be charged at 18% p.a., on the outstanding amount.

In the next section we take a look at the GSTR due dates and the applicable late fee penalties of the same.

GST late fees and penalties:

We will now take a look at some of the popular GST return types and the late fee and interest penalties with them. For administrative purposes, this is imperative as it ensures better GST compliance.

Below is a sample table highlighting the GST late fees, penalties and interest on GST payment.

*Standard GST late fees. Penalties on late fee varies based on annual turnover and other parameters.

The table highlights the late fees payable in cases of late returns. Interest of 18% (or lesser) is applicable as the case might be.

How to pay GST late fees and interest

As a taxpayer, you do not need to calculate interest on GST late payment and GST late fees. It is calculated automatically on the GST portal based on the delay and penalty amount.

When you file returns on the GST portal (//www.gst.gov.in), the late fee will be auto-calculated and reflecting in the section under ‘Interest and Late fee’ for the particular GSTR. This will have to be paid in cash (via net banking). Once paid, you can continue with filing your current GST returns.

FAQs

Author: Anirban Sinha

A product manager with a writer’s heart, Anirban leverages his 6 years of experience to empower MSMEs in the business and technology sectors. His time at Tata nexarc honed his skills in crafting informative content tailored to MSME needs. Whether wielding words for business or developing innovative products for both Tata Nexarc and MSMEs, his passion for clear communication and a deep understanding of their challenges shine through.