Interest on Delayed GST Computed from Original GSTR-3B Due Dates to Payment Date.

Interest on Delayed GST Computed from Original GSTR-3B Due Dates to Payment Date.

Issue

What is the correct methodology for computing interest under Section 50 of the CGST Act on a tax liability (discovered during GSTR-9 filing) that was paid at a later date? Specifically, should the interest be calculated from the original GSTR-3B due dates?

Facts

• The petitioner challenged an order where a demand was confirmed for four defects, including a tax liability (Defect 1) related to outward supplies for the period 2021-22, which was identified in the GSTR-09.

• The petitioner had already discharged this principal tax liability via a debit entry on December 19, 2022.

• A dispute remained over the methodology used by the department to calculate the interest on this delayed payment.

• The petitioner filed a writ petition seeking a correct computation of the interest.

Decision

• The High Court remanded the matter back to the respondent (tax authority) to “redo the exercise” and re-calculate the interest for the disputed defects (1 and 3).

• The court gave a clear direction on the methodology: Interest on the belatedly paid tax must be determined by calculating the delay with reference to the original statutory due dates for the monthly/quarterly GSTR-3B returns (under Section 39) for the periods to which the tax pertained.

• The interest calculation period runs from those respective GSTR-3B due dates up to the date the tax was actually paid (the debit entry on December 19, 2022).

Key Takeaways

• Interest Runs from Original Due Date: This ruling confirms a key principle: interest on a tax liability, even if discovered or paid much later, is calculated from the date the tax was originally due, which is the due date of the GSTR-3B return for that period.

• Payment Date is the End Point: The interest clock stops on the date the tax is actually paid, in this case, the date of the debit entry.

• Remand for Correct Calculation: When the department applies an incorrect methodology for calculating interest, the court will set aside the calculation and remand the matter with specific directions to re-calculate it correctly, rather than quashing the interest levy entirely.