Section 50 of the CGST Act 2017 charges interest at 18% per annum on GST paid after the due date, computed on the net tax liability after ITC setoff — not on the gross output tax. Interest runs from the day after the due date to the actual payment date. Excess ITC availed or utilised fraudulently, or retained after a reversal was required, attracts 24% per annum under s.50(3). Since July 2023 the portal auto-computes and shows this interest in GSTR-3B.
What the law actually requires
Section 50(1) of the CGST Act 2017 — every person who pays tax after the due date shall pay interest at 18% per annum for the period from the day succeeding the due date to the date of payment. Section 50(3) — where ITC is availed or utilised fraudulently or where excess ITC is not reversed despite being required, interest at 24% per annum.
The base is net tax, not gross
The Supreme Court's reading of s.50(1) is settled: interest runs on the net tax liability — the tax payable after setting off input tax credit — and only for the period the tax remains unpaid beyond the due date. A company with ₹10 lakh of output tax and ₹8 lakh of ITC has a net liability of ₹2 lakh; interest on late payment runs on ₹2 lakh, not ₹10 lakh. This is the most common miscomputation in practice, and it works in the taxpayer's favour when ITC is available but against it when there is no credit.
The period
How it is paid and shown
Before July 2023, interest was not separately computed or displayed in GSTR-3B — the taxpayer had to self-compute and pay it through the cash ledger, and a failure to do so surfaced only on demand. From July 2023, the GST portal auto-computes the interest for late payment and reflects it in GSTR-3B, so the amount is now visible at filing. The interest must be paid in cash — it cannot be discharged using input tax credit.
Worked example: Chemline Industries Pvt Ltd pays 16 days late
Chemline Industries Pvt Ltd files its May GSTR-3B on 6 June instead of 20 May, paying its net liability late.
The ₹2,367 is a cash payment into the electronic cash ledger and is not eligible for ITC. If Chemline had claimed ITC of ₹2,40,000 when only ₹2,00,000 was eligible, and utilised the excess before reversal, the ₹40,000 excess would attract 24% per annum interest under s.50(3) from the date of utilisation until reversal — on top of the 18% on any genuinely late tax.
What a director should actually watch
- Compute interest on the net liability after ITC. Model the month-end position before the 20th; if output tax exceeds available credit, plan the cash payment, because the 18% clock starts the next day.
- Since July 2023 the portal shows the interest at filing. Do not be surprised by a GSTR-3B that pre-fills an interest line — reconcile it against your own day-count computation before paying.
- Pay interest in cash, never from ITC. The electronic credit ledger cannot be used for interest, and attempting it triggers mismatches.
- Reverse excess ITC immediately. Any credit claimed beyond GSTR-2B eligibility, or left un-reversed after a credit note, starts accruing 24% from utilisation.
- Track the difference between interest and late fee. s.50 (interest) is 18%/24% on tax; s.47 (late fee) is a per-day fee on the return. Both apply to a late, underpaid month.
How the interest is computed and where it shows up
Since July 2023, the GST portal auto-computes interest on late payment and reflects it in GSTR-3B, so the amount is visible at filing rather than surfacing later on demand. The computation uses the net tax liability (output tax minus eligible ITC) and runs from the day after the due date to the date of payment. A payment made into the electronic cash ledger is applied in the prescribed order — towards interest first, then tax — so a partial payment settles interest before it reduces the tax balance.
The interest also sits on top of other liabilities in a dispute. If a shortfall is detected in scrutiny, the taxpayer owes the s.50 interest from the original due date plus the penalty under Section 73 or 74 (10% of the tax for Section 73, 100% for fraud or suppression under Section 74). The s.50 interest is not a substitute for those penalties — it is the compensation for the time value of the unpaid tax, and it runs regardless of whether the shortfall was intentional.
Consider a partial-payment example: Chemline's ₹3,00,000 net liability is paid in two tranches — ₹1,00,000 on 5 June and ₹2,00,000 on 15 June, against a 20 May due date. Interest runs on ₹3,00,000 for 16 days (21 May to 5 June) and on the remaining ₹2,00,000 for a further 10 days (6 June to 15 June) — the base steps down as each tranche is paid. Most companies discover the interest line only at filing; the discipline is to compute the exposure before the due date and treat the interest as a cash cost of delayed payment, not a surprise.
FAQ
What is the interest rate for late GST payment?
18% per annum under s.50(1) on the net tax liability paid after the due date, from the day after the due date to the date of payment.
Is interest computed on gross tax or net of ITC?
Net of ITC. The Supreme Court position is that s.50(1) interest runs on the tax payable after ITC setoff, not the gross output tax.
When does 24% interest apply?
Under s.50(3), where ITC is availed or utilised fraudulently, or excess ITC is not reversed when required, interest is 24% per annum.
Can I pay GST interest using ITC?
No. Interest must be paid from the electronic cash ledger; ITC cannot discharge interest.
Does the GST portal compute the interest for me?
From July 2023, yes — the portal auto-computes interest on late payment and reflects it in GSTR-3B. Before that, it was self-computed.
Is interest the same as the late fee?
No. s.50 interest compensates the exchequer for delayed tax; s.47 late fee penalises the late return. Both can apply to the same month.
Use the GST interest calculator to model your exposure before the due date: /tools/gst-interest-calculator. For a GST compliance audit of your company, visit pvtltd.co.
Sources
- Section 50(1), Section 50(3) CGST Act 2017
- Section 49 CGST Act 2017 (payment of tax — cash and credit ledgers)
- Supreme Court position on net-tax computation of s.50 interest
- GST portal interest auto-computation from July 2023
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