Section 50 of The Central Goods and Services Tax Act, 2017
- (1)Every person who is liable to pay tax in accordance with the provisions of this Act or the rules made thereunder, but fails to pay the tax or any part thereof to the Government within the period prescribed, shall for the period for which the tax or any part thereof remains unpaid, pay, on his own, interest at such rate, not exceeding eighteen per cent., as may be notified by the Government on the recommendations of the Council. 1[Provided that the interest on tax payable in respect of supplies made during a tax period and declared in the return for the said period furnished after the due date in accordance with the provisions of section 39, except where such return is furnished after commencement of any proceedings under section 73 or section 74 2[or section 74A] in respect of the said period, shall be payable on that portion of the tax which is paid by debiting the electronic cash ledger.]
- (2)The interest under sub-section (1) shall be calculated, in such manner as may be prescribed, from the day succeeding the day on which such tax was due to be paid. 3[(3) Where the input tax credit has been wrongly availed and utilised, the registered person shall pay interest on such input tax credit wrongly availed and utilised, at such rate not exceeding twenty-four per cent. as may be notified by the Government, on the recommendations of the Council, and the interest shall be calculated, in such manner as may be prescribed.]
Summary
- This provision imposes an automatic interest charge if a taxpayer fails to pay their tax by the legal deadline.
- If a taxpayer pays their tax late but declares it in a delayed return, the interest is only charged on the portion paid in cash, not the portion paid using tax credits.
- This exception does not apply if the late return is filed after the government has already started evasion or fraud proceedings.
- If a taxpayer wrongly claims and actually uses input tax credit they were not entitled to, the maximum interest rate jumps to 24 percent.
Practical examples
FAQ
1. Do I have to pay interest on tax covered by my input tax credit if I file late under Section 50 of the tax law?
No, under Section 50 of the Central Goods and Services Tax Act, 2017, if you file late, interest is only calculated on the portion of tax paid by debiting your electronic cash ledger, unless tax recovery proceedings have started.
2. What happens under Section 50 of the Central Goods and Services Tax Act, 2017 if I wrongly use input tax credit?
Section 50 of the CGST Act states that for wrongly availed and utilised input tax credit, you must pay interest at a higher rate, up to 24 percent.
3. When does the interest calculation start according to Section 50 of the CGST Act?
Section 50 of the Central Goods and Services Tax Act, 2017 requires interest to be calculated from the day succeeding the day on which the tax was due to be paid.
Test yourself
Q1.Under Section 50 of the Central Goods and Services Tax Act, 2017, what is the maximum interest rate for failing to pay tax on time?
Q2.According to Section 50 of the Central Goods and Services Tax Act, 2017, what is the maximum interest rate if input tax credit is wrongly availed and utilised?
Q3.Under Section 50 of the Central Goods and Services Tax Act, 2017, on which portion of the tax is interest payable if a late return is furnished before proceedings under Section 73 or 74 begin?
Q4.According to Section 50 of the Central Goods and Services Tax Act, 2017, when does the interest period begin for delayed payment of tax?
Q5.Based on Section 50 of the Central Goods and Services Tax Act, 2017, if a person pays tax late but no proceedings under Section 73 or 74A have started, do they need to wait for a notice to pay the interest?