Section 50 of CGST Act, 2017 : Section 50: Interest On Delayed Payment Of Tax

Explanation using Example

Imagine a business owner, Mr. Sharma, who runs a furniture manufacturing company. He is required to file his GST return and pay the tax due by the 20th of the month following the tax period. For the month of August, Mr. Sharma was supposed to pay GST by September 20th. However, due to some cash flow problems, he failed to pay the tax by the due date.

As per Section 50(1) of the CGST Act, 2017, Mr. Sharma is now liable to pay interest on the unpaid tax amount. The interest rate is not more than 18% as notified by the government. Since he paid the tax on September 30th, he owes interest for the period from September 21st to September 30th.

Furthermore, according to Section 50(2), the interest should be calculated from the day after the due date, which in this case is September 21st, until the date he actually pays, which is September 30th.

In another scenario, if Mr. Sharma had wrongly claimed an input tax credit that he was not eligible for and used it to pay off his tax liability, as per Section 50(3), he would have to pay interest on the wrongly availed and utilised credit. This interest could be up to 24% as notified by the government.