Introduction
GST interest payment becomes applicable when a taxpayer fails to pay GST dues on time, delays return filing, or short-pays tax liability. Understanding how GST interest is calculated and paid is crucial to avoid notices, penalties, and unnecessary financial burden.
This Saving Mantra guide explains the step-by-step process for GST interest payment, applicable interest rates, calculation method, payment procedure on the GST portal, and compliance tips.
What Is GST Interest?
GST interest is a statutory charge levied on taxpayers for delayed payment of tax, excess ITC claims, or late filing of GST returns. Interest is calculated on a daily basis and must be paid before filing the return.
When Is GST Interest Applicable?
GST interest is applicable in the following cases:
- Delay in payment of GST tax
- Late filing of GSTR-3B
- Excess claim of Input Tax Credit (ITC)
- Short payment of tax liability
- Wrong utilization of ITC
GST Interest Rates
| Situation | Interest Rate |
|---|---|
| Delay in tax payment | 18% per annum |
| Excess ITC claim or undue ITC utilization | 24% per annum |
Interest is calculated from the due date till the actual date of payment.
How Is GST Interest Calculated?
GST Interest Formula:
Interest = Tax Amount × Interest Rate × Number of Days / 365
Example
- Tax payable: ₹50,000
- Delay: 20 days
- Interest rate: 18%
Interest = 50,000 × 18% × 20 / 365 = ₹493 (approx.)
Documents & Details Required
- GSTIN and login credentials
- Tax liability details
- Delay period (number of days)
- Electronic cash ledger balance
- Bank account details (for payment)
Step-by-Step Process for GST Interest Payment
Step 1: Login to GST Portal
Visit https://www.gst.gov.in and log in using your GST credentials.
Step 2: Compute Interest Liability
Calculate interest manually or use GST computation tools based on:
- Tax payable
- Delay period
- Applicable interest rate
Step 3: Create Challan (PMT-06 / PMT-07)
Go to:
Services → Payments → Create Challan
Select:
- Interest head (CGST, SGST, IGST)
- Enter calculated interest amount
Step 4: Make Payment
Pay interest using:
- Net banking
- Debit/credit card
- NEFT/RTGS
The amount gets credited to the Electronic Cash Ledger.
Step 5: Offset Interest Liability
While filing GSTR-3B, offset the interest amount using the cash ledger.
Step 6: File GST Return
Submit the return after clearing:
- Tax dues
- Interest
- Late fees (if applicable)
ARN is generated after successful filing.
Time Limit for GST Interest Payment
- Interest must be paid before filing the delayed return
- Non-payment may result in GST notices or recovery action
Late Fees vs Interest Under GST
| Particulars | Interest | Late Fee |
|---|---|---|
| Nature | Compensation for delayed tax | Penalty for delayed return |
| Rate | 18% / 24% | ₹20–₹50 per day |
| Calculation | Daily basis | Fixed per day |
Common Mistakes to Avoid
- Ignoring interest liability while filing returns
- Incorrect calculation of delay period
- Using ITC to pay interest (not allowed)
- Not clearing interest before filing GSTR-3B
- Delaying payment after receiving GST notice
Benefits of Timely GST Interest Payment
- Avoid GST notices and recovery actions
- Maintain clean compliance record
- Prevent compounding liabilities
- Smooth return filing process
- Better business credibility
Why Choose Saving Mantra for GST Compliance?
- Expert GST calculation & advisory
- Accurate interest computation
- Portal handling & payment support
- Notice & demand management
- End-to-end GST compliance services
Frequently Asked Questions (FAQs)
Is GST interest auto-calculated by the portal?
Interest is partially system-calculated but responsibility lies with the taxpayer.
Can GST interest be paid using ITC?
No, GST interest must be paid only through the cash ledger.
Is interest applicable even if return is filed late but tax is paid?
Yes, interest applies until the actual date of tax payment.
Can interest be waived?
Interest waiver is allowed only through specific government notifications.
Conclusion
GST interest payment is a mandatory compliance that cannot be ignored. Correct calculation, timely payment, and proper return filing help businesses avoid penalties, notices, and legal complications.
Professional assistance ensures accuracy, peace of mind, and uninterrupted GST compliance.
Disclaimer
This article is for informational purposes only and does not constitute legal or tax advice. GST laws and interest provisions may change from time to time. Readers are advised to consult qualified GST professionals or contact Saving Mantra before making any compliance-related decisions.