# Interest on Delayed Payment of Tax — Section 50, CGST Act
Section 50 deals with interest payable for two distinct situations:
```
Section 50 — Interest
┌───────────────┴───────────────┐
↓ ↓
CASE 1 CASE 2
Delay in payment of tax Utilisation of wrongly
in full or in part availed ITC
```
Both attract interest @ 18% per annum.
## CASE 1 — Delay in Payment of Tax (Full or Part)
### Period
From: Day next to the due date of payment
To: Date of actual payment of tax
### Rate: 18% p.a.
### Base for Interest — Net or Gross Liability?
Interest is computed on NET tax liability if BOTH of the following are satisfied:
1. The return for that tax period has been filed (even if belatedly), AND
2. No proceeding under section 73/74 has been initiated.
Else — i.e., if tax is paid through a return of another period, or proceeding u/s 73/74 has been initiated — interest is computed on GROSS tax liability (without setting off ITC).
### Important Sub-Rules
Net GST Liability = Tax payable after setting off ITC (Case 1).
If amount was already lying in the Cash Ledger before the due date, that amount is not considered for interest for the period it was lying there. Interest is charged only on the shortfall actually paid late.
Interest is charged till the date GSTR-3B is filed, considering reduced ITC balance available.
## CASE 2 — Wrongly Availed ITC that is Utilised
### Period
From: Day next to the date of utilisation of wrongly availed ITC
Mere availment of wrongly availed ITC does NOT attract interest. Interest is triggered only when the wrongly availed ITC has been utilised (i.e., the ledger has been actually drawn down such that it 'used' the wrongly availed credit).
If, after wrongly availing ₹5 L, the credit ledger balance remained above ₹5 L (e.g., ₹7 L), then no wrongly availed ITC has been utilised — no interest.
## Quick Reference Table
Aspect
Case 1: Delay in tax payment
Case 2: Wrongly availed ITC
Rate
18% p.a.
18% p.a.
Base
Net (or Gross) tax liability
Excess ITC utilised
From
Day after due date
Day after date of utilisation
To
Date of payment
Date of reversal/payment
Worked example
### Example 1
CASE 1 — Scenario (i): Return Filed Late, No Proceedings Initiated
Tax liability for February:
Output liability ₹1,50,000
RCM liability ₹40,000
ITC balance ₹70,000
Cash ledger balance ₹20,000 lying from Feb to April
Return for Feb is filed on 17 April. Due date = 20 March.
Interest period: 21 March to 17 April = 28 days
Computation (Net liability — return filed, no proceedings):
Output ₹1,50,000 − ITC ₹70,000 = ₹80,000
+ RCM ₹40,000 = ₹1,20,000
− Cash already lying ₹20,000 = ₹1,00,000
Interest = ₹1,00,000 × 18% × 28/365 = ₹1,381
### Example 2
CASE 1 — Scenario (ii): Liability Reported in a Later Period's Return
Same liabilities as Scenario (i). Return for Feb was filed on 20 March (timely) but the liability was omitted. It is now disclosed in the March return filed on 17 April.
Since tax is paid through return of another period, interest is on GROSS liability (no ITC set-off, no cash adjustment).
Interest period: 21 March to 17 April = 28 days
Gross liability = ₹1,50,000 + ₹40,000 = ₹1,90,000
Interest = ₹1,90,000 × 18% × 28/365 = ₹2,624
### Example 3
CASE 2 — Wrongly Availed ITC
ITC of ₹15,00,000 was availed in the January return (filed in February). Of this, ₹5,00,000 related to goods not yet received → wrongly availed.
In the March return, liability was discharged on 17 April (the earlier of due date 20 April or actual filing 17 April). Wrongly availed ITC was reversed/paid back on 20 June.
Period: 18 April → 20 June = 64 days
Wrongly utilised computation depends on balance remaining after utilisation:
Situation 3:NIL — no wrongly availed ITC was actually utilised
⚠️ Common exam mistakes
Charging interest on gross liability when both conditions for net liability (return filed + no s.73/74 proceedings) are satisfied.
Forgetting to reduce the cash ledger balance already lying (for the period it was lying) before computing interest under Case 1.
Charging interest from the due date itself — interest runs from the day NEXT to the due date.
Charging interest on mere availment of wrongly availed ITC — interest applies only when such ITC is actually utilised.
For IGST wrongly availed, comparing only against the IGST balance — the correct comparison is against the TOTAL of IGST + CGST + SGST/UTGST in the credit ledger.
Picking the wrong 'date of utilisation' — when tax is paid through a return, it is the EARLIER of due date or actual date of filing, NOT necessarily the actual filing date.
Forgetting that when liability of an earlier period is disclosed in a LATER period's return, interest will be on the GROSS liability (no ITC set-off allowed).
Using 360 days instead of 365 days for interest computation — GST uses 365 days.
Bare-Act text Section 50 of CGST Act, 2017 · CGST Act, 2017 · click to expand
Section 50 — Interest on delayed payment of tax: (1) Every person who is liable to pay tax in accordance with the provisions of this Act or the rules made thereunder, but fails to pay the tax or any part thereof to the Government within the period prescribed, shall for the period for which the tax or any part thereof remains unpaid, pay, on his own, interest at such rate, not exceeding eighteen per cent., as may be notified by the Government on the recommendations of the Council. 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, shall be levied on that portion of the tax which is paid by debiting the electronic cash ledger. (3) Where the input tax credit has been wrongly availed and utilised, the registered person shall pay interest on such input tax credit wrongly availed and utilised, at such rate not exceeding twenty-four per cent. as may be notified by the Government, on the recommendations of the Council, and the interest shall be calculated, in such manner as may be prescribed.