Introduction:
There is often confusion among taxpayers regarding the rate of interest on ITC reversal and delayed payment of GST. It’s crucial to have a clear understanding of the applicable legal provisions to ensure compliance. In this article, we will discuss the rate of interest and relevant amendments related to the utilization of wrongly availed GST ITC, delayed payment of GST, and interest on the next tax liability.
Rate of Interest on ITC reversal / delayed payment of tax
There is a lot of confusion among many taxpayers regarding rate of interest on ITC reversal / delayed payment of GST and tax on next tax liability. For clearing the doubts, please refer below legal provision.
Rate of Interest on utilization of wrongly availed GST ITC:
Retrospective amendment w.e.f. 01.07.2017 has been made in sec 50 (3) of the CGST Act, 2017 by Finance Act, 2022 to provide that interest is required to be paid on the wrongly availed ITC only when the same has been utilized.
Vide Sec 111 of the Finance Act, 2022, sec 50(3) is substituted retrospectively w.e.f. 01.07.2017 vide notification 09/2022 – Central Tax dated 05.07.2022 to clarify that interest would be leviable only when ITC is wrongly availed and utilized and at the rate of 18% and not 24%.
Rate of Interest on delayed payment of GST:
As per notification 13/2017 – Central Tax dated 28.06.2017 which are amended retrospectively w.e.f. 01.07.2017 vide Section 116 of Finance Act, 2022 respectively to notify the rate of interest on delayed payment of CGST, SGST, IGST & UTGST from 24% p.a. to 18% p.a. under section 50(3) of the CGST Act read with sec 20 of IGST Act & sec 21 of the UTGST Act.
Interest on next tax liability:
A proviso was inserted in sec 50(1) of the CGST Act, vide Finance Act, 2019notified vide notification 63/2020- Central Tax dated 25.08.2020 w.e.f. 01.09.2020, to provide for computation of interest on next tax liability i.e. the amount to be paid in cash after adjustment of available ITC from gross tax liability, which was later substituted vide clause 112 of the Finance Act, 2021 dated 28.03.2021 notified vide notification 16/2021- Central Tax dated 01.06.2021 retrospectively w.e.f. 01.07.2017.
Conclusion:
Understanding the rate of interest on ITC reversal and delayed payment of GST is essential for taxpayers to comply with the applicable legal provisions. The retrospective amendments made in the Finance Acts of 2022, 2019, and 2021 have clarified the interest rates and computation methods for different scenarios. By staying informed about these changes, taxpayers can ensure accurate compliance with GST regulations.
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Hi Sir ,
If we claim wrong itc & we have paid interest along with next month liabilty (18% P.A) so how we present interest amount in gst portal & which form we need to file in GST portal for interest amount.