Interest & penalties

GST is a self-assessment tax wherein the tax payer is expected to know the law and comply with it. Ignorance of law is generally no excuse.

Interest under GST

Interest is levied under tax laws for delay in payment of tax. The levy of interest invariably discourages entrepreneurs from knowingly delaying payment of taxes. Notification 13/2017- Central Tax prescribes rates of interests in cases of delay in payment of taxes.


Rate of Interest

Delay in payment of tax when the same was liable to paid

18% p.a.

In certain cases, the mismatch would arise in the supply details disclosed by the supplier and inward details disclosed by the recipient. If the recipient has claimed credit more than the tax paid by the supplier, the recipient will have to reverse such credit. The recipient can retake the credit as and when the supplier shows the tax liability in its return within the time prescribed.
If the recipient retakes the credit

  • before supplier declares its liability
  • if supplier declares its liability after the prescribed time limit

recipient will be required to pay interest  on the credit taken incorrectly. The interest will be calculated till the time such incorrect credit is not reversed

24% p.a.

Similar to above, mismatch can arise on account of credit notes where the recipient is required to reverse input tax credit. If the supplier reduces his tax liability on account of credit before the recipient reduces its input tax credit, the supplier will have to pay interest on the same.

24% p.a.

Interest payable if refund is not processed within 60 days of date of application for refund

6% p.a.

Interest payable if refund is not processed within 60 days of order sanctioning refund

9% p.a.


Late Fees

The law prescribes late fees for delayed filing for GST returns. These are:

  • Rs. 100 per day subject to a limit of Rs.5,000 for delayed filing of monthly returns
  • Rs.100 per day subject to a limit of 1/4th percent of the turnover in the State for delayed filing of annual return 

Penalty under GST

Various penal provisions are provided in the GST law - some of which are mandatory in nature and some are discretionary at the will of the proper officer.

Penalty for 21 types of offences

GST law provides for various kinds of willful offences for which the penalty prescribed is Rs. 10,000 or the tax amount involved, whichever is higher. These penalties are mandatory in nature if the default is proven against the assesse. Examples of such offences are:

  • supplying goods or services without issuance of invoice or issuing false invoice
  • does remit tax within 3 months of collecting the tax amount
  • fails to deduct TDS or collect TCS
  • avails credit without actually receiving goods / services
  • fraudulently obtains refund
  • falsifies books or tampers with records
  • is liable to take registration but does not take

Non-payment of tax or irregular availment of input tax credit

Similar to provisions under Central Excise and Service tax laws, penalty on non-payment of tax or irregular availment of credit has been divided in two cases:

  • cases not involving fraud, willful misstatement, etc – higher of Rs.10,000 or 10% of the tax due
  • cases involving fraud, willful misstatement, etc – higher of Rs.10,000 or 10% of the tax due

General penalty

The law provides for a general penalty of Rs. 25,000 in case of a offences for which no specific penalty has been prescribed.

Detention of Goods in transit

Where goods are transported in contravention of the GST provisions, they can detained by the GST authorities. Such cases may require payment of heavy penalties before the goods are released by the road side authorities. Provisions provide for provisional release of goods and conveyance upon furnishing of security for the tax and penalty amount payable.

Confiscation of goods

In certain extreme cases, the GST authorities have the power to confiscate goods. Where the confiscation is held legal, the owner of the goods may have to pay redemption fine for have the goods released. This is in addition to the tax, interest and penalty payable.