Interest Payment on GST – What are the new changes incorporated?

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Finance Minister of India, Mrs. Sitharaman introduced array of changes in the Union Budget 2019 presented on 5th of July that giving relief to the taxpayers registered under the GST Act. The Budget included an amendment to provide relief to the taxpayers from paying interest amount in case of late payment of GST.

Till the date this amendment was made, according to Section 50 of the Goods and Service Tax Act, the taxpayers who failed to pay the tax on or before the respective due date were required to pay interest on the whole amount of the tax including the amount of income tax credit that is paid after the notified due date. Payment of GST amount is required to be made at the time of filing the returns GSTR-3B and GST-4 and if the payment is not made within the due dates of filing the returns, then the taxpayer would be liable to pay the interest amount as per the recently notified rates.

Before this amendment was passed in the Budget, in the 31st GST council, it was approved that interest would be levied on the net tax liability of the taxpayer. However, the said recommendation could not come into effect because no such notification was issued by the Ministry of Finance.

Interest not payable on entire Liability

The new amendment also states that the interest would be charged only on that portion of Goods and Service Tax liability which is paid by debiting the electronic cash ledger, i.e. payment made by the mode of cash only. Currently, interest is paid at the rate of 18% per annum on the unpaid amount of GST from the day following the day on which the tax was due to be paid by the taxpayer.

However, the amendment is not applicable in the case where the taxpayer fails to file the return and pay the amount of tax on his own. If the return is filed or tax is paid after any demand notice or proceedings made by the GST Department, then the interest would be levied on the Gross tax Liability of the taxpayer registered under GST. This is an exception to the new amendment made.

The new proviso has removed the doubt and confusion among the taxpayers regarding the interest for late payment of GST that interest would be charged on the Gross Tax Liability of the taxpayer or on the Net Tax Liability of the taxpayer.

The said amendment would result in the reduced tax liability of the taxpayers that will greatly benefit the taxpayers. If any of the taxpayers has paid interest on the full tax liability in the current financial year, then a notification will also be issued in a very short period of time clarifying the details of the amount of refund to be made to them and the procedure to get the refund amount.


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An MBA in finance, I like to cover the wide range of topics related to Taxation, SEBI, Finance and anything that is Public Helpful. The motive is always to make it simpler for the taxpayers understand the system better and take informed decisions.

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