Practical examples and solutions to understand applicability of reduced interest under GST

There has been whole lot of discussions about how the applicability of reduced rate of interest and waiver of late fees shall work in case of taxpayers having turnover exceeding Rs. 5 crores. The Notification Nos 31/2020, 32/2020 and 33/2020 – Central Tax dated 03.04.2020 provides for lower interest, waive of late fees for GSTR 3B and waiver for late fees of GSTR 1 respectively. There had been various documents where these notifications has been misinterpreted and industry is assuming that due dates of filing of returns have been extended. It is not the due dates of the returns which have been extended rather late fees applicable on them has been waived off with a condition that if the returns are not filed as per dates specified by the government full late fees and interest shall be made applicable. We shall understand the complete issue by way of practical examples in this article. But before we do that let us summarise these notifications quickly:

S. No. Notification No: Relief granted Watch Points:
1. 31/2020- CT dated 03.04.2020 a) Nil rate of interest for taxpayers having turnover less than Rs. 5 crores

b) Reduced rate of interest of 9% where the turnover exceeds Rs. 5 Crores for delayed payment of tax from the end of 15 days from the actual due dates

a) Rs. 5 crore turnover pertains to aggregate turnover of preceding financial year and not current financial year. This would mean for reduced interest turnover of FY 2018-19 shall be relevant in respect of February & March 2020 and for April 2020 relevant turnover shall be for FY 2019-20.

b) If returns are not filed till the due date as specified in the notification, full interest shall be applicable.

c) Due dates : Return (GSTR 3B) should be filed maximum by 24th June 2020 (for taxpayers having turnover exceeding Rs. 5 crores) and other due dates as applicable. Please refer the notification.

d) The date of payment shall be the date when the tax is set-off in GSTR 3B and not the date when cash is deposited in Electronic Cash Ledger.

2. 32/2020 – CT dated 03.04.2020 Late fees waived off in respect of filing of GSTR 3B for months of February 2020 to April 2020 provided GSTR 3B is filed within due date specified in the notification Full late fees to be levied if return filed after the specified due date for GSTR 3B.
3. 33/2020 – CT dated 03.04.2020 Late fees waived off in respect of filing of GSTR 3B for months of March 2020 to May 2020 provided GSTR 1 is filed up to 30th June 2020 Full late fees to be levied if GSTR 1 filed after 30th June 2020.

Now let us understand the applicability of interest and late fees by following examples:

Example 1:

M/s Abhinandan Limited having turnover more than Rs. 5 crores in FY 2018-19 files GSTR 3B for February 2020 on 5th June 2020. Whereas the company had deposited the tax amounting to Rs. 30 lakhs in Electronic Cash Ledger on 20.03.2020.  (Specified due date: 24th June 2020)

Total Delay in No of Days 77
Delay in No. of days beyond 15 days 62
Benefit Applicable as per notification (i.e. return filed within specified time) Yes
Applicable Interest 9%       45,863
Applicable Late Fees Nil Nil

Example 2:

M/s Abhinandan Limited having turnover more than Rs. 5 crores in FY 2018-19 files GSTR 3B for February 2020 on 25th June 2020. Whereas the company had deposited the tax amounting to Rs. 30 lakhs in Electronic Cash Ledger on 20.03.2020.  (Specified due date: 24th June 2020)

Total Delay in No of Days 97
Delay in No. of days beyond 15 days 82
Benefit Applicable as per notification (i.e. return filed within specified time) No
Applicable Interest 18%     143,507
Applicable Late Fees (per day in Rs) 100         9,700

Example 3:

M/s Abhinandan Limited having turnover more than Rs. 5 crores in FY 2018-19 files GSTR 3B for February 2020 on 15th June 2020. The turnover of company for FY 2019-20 stood at Rs. 4.50 crores. The company had filed the return for April 2020 on 25th June 2020. Whereas the company had deposited the tax amounting to Rs. 30 lakhs and Rs. 25 lakhs in Electronic Cash Ledger on 20.03.2020 and 20.05.2020 respectively for February 2020 and April 2020 respectively.  (Specified due date in this case would be for February 2020: 24th June 2020 and for April 2020: 30th June 2020)

Interest and Late Fees applicable for February 2020 GSTR 3B:
Total Delay in No of Days 87
Delay in No. of days beyond 15 days 72
Benefit Applicable as per notification (i.e. return filed within specified time) Yes
Applicable Interest 9%       53,260
Applicable Late Fees (per day in Rs)                    –             –
Interest and Late Fees applicable for April 2020 GSTR 3B:
Total Delay in No of Days (Actual due date 20.05.2020) 36
Delay in No. of days beyond 15 days Not Applicable NA
Benefit Applicable as per notification (i.e. return filed within specified time) Yes
Applicable Interest (No interest as turnover less than Rs. 5 crores in preceding FY) Nil             –
Applicable Late Fees (per day in Rs)                    –             –

Example 4:

M/s Abhinandan Limited having turnover more than Rs. 5 crores in FY 2018-19 files GSTR 3B for February 2020 on 25th June 2020. Whereas the company had deposited the tax amounting to Rs. 30 lakhs in Electronic Cash Ledger on 24th June 2020.  (Specified due date: 24th June 2020)

Total Delay in No of Days 97
Delay in No. of days beyond 15 days 62
Benefit Applicable as per notification (i.e. return filed beyond specified time) No
Applicable Interest 18%       143,507
Applicable Late Fees 100           9,700

Example 5:

M/s Abhinandan Limited having turnover more than Rs. 5 crores in FY 2018-19 files GSTR 3B for March 2020 on 5th June 2020. Whereas the company had deposited the tax amounting to Rs. 30 lakhs on the same day. But the company delayed in filing of GSTR 1 and filed the same on 1st July 2020. (Specified due for GSTR 3B – 24th June 2020 and GSTR 1 – 30th June 2020)

Total Delay in No of Days 77
Delay in No. of days beyond 15 days 62
Benefit Applicable as per notification (i.e. return filed within specified time) Yes
Applicable Interest 9%         45,863
Applicable Late Fees for GSTR 3B Nil Nil
Total No. of delay in filing of GSTR 1 81
Waiver of late fees as per notification (i.e. return filed within specified time) No
Applicable Late Fees for GSTR 1 200         16,200

Example 6:

M/s Abhinandan Limited having turnover less than Rs. 5 crores in FY 2018-19 files GSTR 3B for February 2020 on 1st July 2020. Whereas the company had deposited the tax amounting to Rs. 6 lakhs in Electronic Cash Ledger on 20.03.2020.  (Specified due date: 29th June 2020)

Total Delay in No of Days 99
Delay in No. of days beyond 15 days Not Applicable NA
Benefit Applicable as per scheme (i.e. return filed within specified time) No
Applicable Interest 18%         29,293
Applicable Late Fees (per day in Rs) 100           9,900

The views expressed by the author is based on his understanding of law and the prevailing circumstances. Taxpayers are requested to use the views judiciously and author shall not be liable for any gain/loss which might arise by referring his article.

Keshav R Garg

(B.Com, FCA, CS, ISA (ICAI), LLB)

3328, First Floor, Sector 27 D, Chandigarh, INDIA 160019

Phones: +91-172-461-3328, +91-98880-90008

E-mail: keshavgarg@kdai.in

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