understanding interest provisions under Section 50 of CGST Act,2017

Please read proviso to Section 50(1) of CGST Act 2017.

"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 in respect of the said period, shall be payable on that portion of the tax which is paid by debiting the electronic cash ledger".

Proviso to Section 50(1) of CGST/SGST Act,2017 is understood with examples as hereunder:

A tax payer has Input tax credit (ITC) of Rs 1 cr in credit ledger as on 20.10.2022. But he was required to pay GST of Rs 1.20 cr for the month of September 2022 . He could not file GSTR-3B return on due date of Rs 20.10.2022 as he had no funds to discharge his total tax liability.

If he filed the said September 3B Return on 20.12.2022 and paid Rs 1.2 cr by utilising Rs 1 cr ITC, then as per the proviso to Section Section 50(1) of CGST/SGST Act Act,2017, he need not pay interest on Rs 1.2 cr and it is sufficient if he pays interest on Rs 20 lakhs which is cash portion of the total tax liability.

However, if the September 2022 GSTR-3B return is filed after initiation of any proceeding under Section 73/74 of the CGST/SGST Act 2017, then interest is payable on entire Rs 1.2 cr.

Now let us see another example.

On 20.10.2022 , the tax payer had Rs 1 cr ITC in his electronic credit ledger as closing balance after paying his tax liability discharged @12% on a new product and filing GSTR-3B return on due date of 20.10.2022.

If he realised on his own that new product attracts GST at 18% and not 12% and pays differential gst of say Rs 60 lakhs on 20.12.2022 by utilising ITC out of closing balance of Rs 1 cr, then he is liable to pay interest on Rs 60 lakhs also.