Late fees and interest rates form the important components of GST payment and are generally incurred by businesses as well as taxable individuals if there is a delay, whether intentionally or unintentionally, in submitting or filing their GST returns for the given due date. As per the GST regulations, the late fee is an amount that is charged from tax payers for the delay in filing their GST returns. It can thus, also be referred to as an overdue fine. Also, note that this late fee may increase on a per-day basis for each day’s delay after the due date has crossed. Late fees are thus, payable for delayed filing of Form GSTR-3B and Form GSTR-1 by taxpayers having no outward supply or those who are required to file Nil Return and for taxpayers who have the liability of GST payment.

In this article, we are going to cover in the most comprehensive way, an updated insight on late fees and interest rates on GST returns that are charged to taxpayers.

Late Fee for Delayed or Non-Filing of GST Returns

If a business that is registered under GST misses filing their GST returns within the stipulated due dates, then a certain amount is charged in the form of late fees. This late fee is also applicable for the delay in filing NIL returns. For example, even though there are no figures to declare for sales or purchases for the month of December 2019 in the GSTR-3B, it is still mandatory that this return must be filed by the business. The number of late fees will depend upon the number of days of delay from the due date. GST returns in GSTR-3B is filed on 23rd January 2020, which is three days after the prescribed due date i.e., 20th January 2020. The late fees will be calculated for three days and is usually to be deposited in cash only.

However, as of now, the government-run GST portal is allocated to charge a late fee on returns, such as GSTR-3B, GSTR-4, GSTR-5, GSTR-5A, GSTR-6, GSTR-8, GSTR-7 and GSTR-9 only.

The GST late filing penalty has been specified as follows:-

• A person fails to furnish details of outward or inward supplies, monthly return, or final return by the due date: The GST penalty for late filing is INR 100 for every day during which the failure continues, subject to a maximum of INR 5,000.

• A person fails to furnish the annual return by the due date: The GST late filing penalty is INR 100 for every day during which the failure continues, subject to a maximum of quarter percent of the person’s turnover in the state where he is registered.

Interest Rate for Late Payment Under GST

While the penalty and/or interest rates on the applicable offences is yet to be notified, the penalty for late payment of GST has been specified as follows:

• A person liable to pay tax fails to pay the tax: Interest on the tax due will be calculated from the first day on which the tax was due to be paid at an interest rate of 18%.

• A person makes an undue or excess claim of input tax credit or undue or excess reduction in output tax liability: An interest rate of 24% on the undue excess claim or undue or excess reduction.

• A recipient of a service fails to pay to the service provider the amount towards the value of the service, along with tax payable thereon, within 180 days from the date of issue of invoice by the supplier: An interest rate of 18% on the amount due will be added to the recipient’s liability.

Interest Rates Under GST

Generally, the rate of interest is applicable to late payment of the GST return that is due. Thus, the rate of interest is required to be paid by every taxpayer who:-

• Delays in making GST payment i.e. pays GST after the due date
• Claims excess Input Tax Credit (ITC)
• Reduces excess Output Tax Liability

Currently, GST has to be paid at the time of filing GSTR-3B and GSTR-4 returns.

If the taxable person and/or business fails to file their GST return within the stipulated due date of filing return, then the following rates of interest must be paid by the taxpayer:-

• If tax is paid after the due date, then the rate of interest charged will be 18% per annum.

• If there is excess ITC claimed or excess reduction in Output Tax, then the rate of interest charged will be 24% per annum.

The interest rate, therefore, has to be calculated from the next day on which tax was due. For example, a taxpayer fails to make a tax payment of Rs. 10,000 for the month of December 2019 (for which the due date is 20th January 2020). However, he/she makes the payment on 20th February 2020. So, the rate of interest for the late payment of GST will be calculated as follows:-

Rs. 10,000 x 31 days/365 x 18% = Rs. 153

Thus, it is important to make tax payments on time and also, file GST returns within the specified due dates to avoid late fees and interest on GST return.

Paying Late Fees and Interest on GST Return

Because late fees are charged based on the number of days the taxpayer has not filed his/her GST return, the amount of late fee applicable will automatically be calculated by the GST portal when submitting the GST return.

The late fee on GST return is required to be paid in cash separately for CGST, SGST, and IGST, respectively, in separate electronic cash ledgers. Thus, the taxpayer will not be allowed to file his/her GST return without paying a late fee. Late fee for the particular month includes the previous month’s late fee charged due to delay in filing of the GST return. Also, the late payment or non-payment of GST returns will attract interest as well.

As per GST Act, the late fees imposed on GST return is as follows:-

• For GST Annual Returns: Rs. 200 per day (Rs. 100 CGST + Rs. 100 SGST) of default up to a maximum of 0.25% of turnover.

• For all GST returns except GST Annual Returns (GSTR-9): Rs. 200 per day (Rs. 100 CGST + Rs. 100 SGST/UTGST) of default up to a maximum of Rs. 5,000.

Updates

As per the information laid by the GST Act, here are a few updates for late fees and interest rates on GST payment by businesses and individual taxpayers:

(i)10th January 2020

The late fee waiver for GSTR-1 for the period of July 2017 to November 2019, further extended till 17th January 2020 from 10th January 2020.

(ii) 26th December 2019

The late fee has been waived for GSTR-1 for the period July 2017 to November 2019, if the taxpayer submits the return before 10th January 2020.

(iii) 31st August 2019

The late fees for July 2019’s GSTR-1(filed monthly) and GSTR-6 have been waived for the tax payers having a principal place of business in certain districts of the flood-affected states of Bihar, Gujarat, Karnataka, Kerala, Maharashtra, Odisha and Uttarakhand and all districts of Jammu and Kashmir (J&K).

Interest on Late Fees

When the late fee on GST return is accumulated over time, the interest is also charged on non-payment of late fees. On the total penalty liability, interest at the rate of 18% per annum is applied. This interest is paid by the tax payer at the time of paying the late fees. The fees, as well as the interest, are calculated for the period of the due date to the date of actual filing of return.

Conclusion

For businesses that need to charge GST, it is necessary to file the GST returns on time as specified by the tax department. As such, missing the deadline can result in heavy penalties and interest rates. There are various types of GST returns which can be beneficial to the public. However, one should always take care of preparing all the documents and exemptions under the section. There have been a few amendments under the new GST Act and there is also a portion of what rate of interest should be charged on the incurrence of late fees on GST returns under certain circumstances.