Article explains Calculation of Interest on GST liability in following situations-
1. Reduction in GST liability reported in GSTR 1 but correspondingly not reported by the recipient and discrepancy is not rectified by the supplier;
2. Any reduction in output tax liability that is found to be on account of duplication of claims;
3. Failure to pay the tax or any part thereof to the Government within the period prescribed;
4. Undue or excess claim of input tax credit under sub-section (10) of section 42
5. Undue or excess reduction in output tax liability under sub-section (10) of section 43
6. Reversal of input tax credit in the case of non-payment of consideration
(Please note that the interest shall be calculated w.e.f. the date of claiming the credit and not from the expiry of 6 months)
7. Inputs or capital goods are not returned to the principal within 1 year or 3 years respectively by the Job worker
8. Incorrect availment or utilisation of input tax credit
9. Any other defaults for short payment/non payment or erroneously refunded
Table showing Calculation of Interest on Liability of GST
| S. N. | Situation | Rate of Interest | Period | Relevant provisions |
| 1 | Reduction in GST liability reported in GSTR 1 but correspondingly not reported by the recipient and discrepancy is not rectified by the supplier; | 18% | From the date of availing of credit till the corresponding additions are made under the said sub-sections. | Section 43(5) and (8) read with section 50(1) of CGST Act, 2017 |
| 2 | Any reduction in output tax liability that is found to be on account of duplication of claims; | Section 43(6) and (8) read with section 50(1) of CGST Act, 2017 | ||
| 3 | Failure to pay the tax or any part thereof to the Government within the period prescribed; | For the period for which the tax or any part thereof remains unpaid; | Section 50(1) of CGST Act, 2017 | |
| 4 | Undue or excess claim of input tax credit under sub-section (10) of section 42 | 24% | Section 50(3) of CGST Act, 2017
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| 5 | Undue or excess reduction in output tax liability under sub-section (10) of section 43 | |||
| 6 | Reversal of input tax credit in the case of non-payment of consideration
(Please note that the interest shall be calculated w.e.f. the date of claiming the credit and not from the expiry of 6 months) |
18% | The period starting from the date of availing credit on such supplies till the date when the amount added to the output tax liability | Rule 37(2) and (3) of CGST Rules, 2017 |
| 7 | Inputs or capital goods are not returned to the principal within 1 year or 3 years respectively by the Job worker | 18% | From the date of delivery challan issued to the Job worker by the Principal till the date of reporting in output liability | Rule 45 of CGST Rules, 2017 |
| 8 | Incorrect availment or utilisation of input tax credit | 18% | For the period of default | Section 73 of CGST Act, 2017 |
| 9 | Any other defaults for short payment/non payment or erroneously refunded | 18% | For the period of default | Section 50 of CGST Act, 2017 |
(Authors – CA Neeraj Kumar and CA Deepak Arya, RAPG & Co. Chartered Accountants from Delhi and can be reached at [email protected], 9999836182/9818449179)
