Introduction:

According to GST rules, Interest and penalty under GST form important components of the Goods and Services Tax (GST) payment and are incurred by  GST Registered company/entity, which fails to file GST Returns by the prescribed due dates, as prescribed by the GST act, is deemed as non compliance and attract interest and penalties under the GST act.  A prescribed late fee will be paid on each day of delay, in case of delay in filing of GST returns.  And interest is paid on the GST payable amount at prescribed percentage by the GST act. In this article lets under stand the interest and penalty under GST.

Section 1: The Significance of Timely GST Filing

Timely filing of GST returns is not just a legal obligation but a fundamental practice for the smooth functioning of the tax system. It ensures accurate reporting of financial transactions, facilitates seamless input tax credit claims, and contributes to the overall efficiency of the GST framework.

Section 2: Interest and penalty under GST on Late GST Payments

When GST returns are filed after the due date, the taxpayer is liable to pay interest on the outstanding tax amount. The interest is calculated from the day following the due date to the date of actual payment. According to the GST Penalty rules, taxpayer who fails to pay their taxes on time will be paid interest at the rate of 18% per anum.

Section 3: Interest and Penalty for Late Filing of GST return

In addition to interest, late filing of GST returns attracts penalties. The penalty is levied for each day of delay until the return is filed. The amount of the penalty varies based on factors such as the type of return and the duration of the delay. Lets understand the interest and penalty under GST

1. In case of nil GSTR-1 and GSTR-3B filing –  GSTR-3B late payments are Rs. 20 (Rs. 10 for CGST and Rs. 10 for SGST) per day for NIL returns. The maximum late fee charged shall be capped at Rs.500 per return (i.e Rs. 250 each for CGST & SGST).

• In case of GSTR-1 and GSTR-3B other than nil filing –  GSTR-3B late payments are Rs. 50 (Rs. 25 for CGST and Rs. 25 for SGST), maximum late fee is fixed based on annual turnover slab, as follows:

1. If the annual turnover in the previous financial year is up to Rs.1.5 crore then the late fee of maximum Rs 2,000 per return can only be charged (i.e Rs.1000 each for CGST and SGST).
2. If the turnover ranges between Rs.1.5 crore and Rs.5 crore then the maximum late fee of Rs.5,000 per return can only be charged  (i.e Rs. 2500 each for CGST  and SGST)
3. If the turnover is more than Rs.5 crore then late fee of maximum Rs.10,000 (i.e Rs. 5000 per CGST and SGST) can be charged

Section 4: Impact on Input Tax Credit (ITC)

Late filing not only incurs financial burden but also affects a business’s ability to claim Input Tax Credit. Timely filing is a prerequisite for availing ITC, and any delay may lead to the loss of this crucial benefit. Businesses should prioritize adherence to deadlines to optimize their tax credits.

Section 5: Points to be keep in mind in relation to interest and penalty under GST – and also for late filing of GST Returns

1. Taxpayer who fails to pay their taxes on time will have to pay interest at the rate of 18% per annum and also need to pay late filing fees.So missing payment within due date attract interest and penalty under GST
2. When Tax payer avails excess input tax  credit, an interest of 24% per annum  may levied
3. Filing of NIL return is mandatory even if no transaction
4. Late filing of GST return attract penalty for every day of delay
5. Interest and penalty for late filing of GST returns can be paid through Cash ledger only
6. The GST late fees get auto-populated in the next period’s GST return. There is no option to not pay late fees. The system will not allow you to proceed with filing your GST returns until you pay the late fees.
7. If you have not filed your GST returns for 6 months, you could risk your GST registration getting cancelled. 

Conclusion:

Every businesses must be vigilant about is the timely filing of GST returns. Failure to adhere to the prescribed deadlines can result in financial implications in the form of interest and penalty under GST. In this article, we have looked into the effect of late filing and the importance of meeting GST return deadlines. The purpose of this article is to make you understand the compliance with respect to interest and penalty under GST . And also for late filing of GST return and to file the GST return within due dates. Hope this article is helpful to you.

Disclaimer: The content and views stated in this article is solely for informational purpose only.

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