How to Calculate Interest on Your GST Return?

Goods and Services Tax (GST), which was implemented in 2017 as an absolutely new taxation framework, has been amended multiple times since then.

These revisions have frequently created taxpayer uncertainty, resulting in several extensions of timelines for filing returns and a lower number of taxpayers adhering to the return filing procedure.

As a result, it became necessary to enforce the return filing procedure by imposing penalties on late filing of GST and interest on delayed payments of any GST dues.

If you need clarity on calculating the interest, try to use a GST interest calculator available on the internet, or read on to get more insight.

GST payments made beyond the deadline will be subjected to an interest being levied on them. Below are the scenarios in which interest is to be paid by a taxpayer:

  • If the GST payment has been delayed until after the actual due date, the taxpayer will have to pay an interest at an annual rate of 18 percent. This will be applicable right from the very next date of the payment deadline.
  • If a taxpayer diminishes excess output tax liability or avails excess input tax credit, then too he is liable to pay interest. On this, the rate is higher and is set at an annual interest rate of 24 percent.

Example to Calculate Interest on GST Late Payment

The below is a simple example to help you understand how interest is calculated on GST return late payment. It will help you to understand the answers an online GST interest calculator might provide you.

Let’s suppose you have a tax liability of INR 2000 for a particular month. For some reason, you have not been able to pay your taxes on time for that month.

Say you realise it soon enough, and are able to make the payment just one day after the due date. The interest you will be charged for that one day of delayed payment will be calculated as such:

2000 x 18/100 x 1/365 = INR 0.98 Per Day

This implies that for every single day that you delay your GST payment, you will have to pay this amount of INR 0.98 per day.

Calculating Interest after Government Relief Measures for 2021

Bearing in mind the ongoing global pandemic, for the period of March/April 2021, the government had set forth a variety of relief measures, some of which included relief on GST payment deadlines as well as interest rates.

For ease, many people use a business loan calculator or contact tax experts to get all their work done. But understanding how these things work can be beneficial for any business owner.

The due date to file taxes for the period of March 2021, was 20th April 2021.

If you are a taxpayer classed by AATO as paying up to Rs.5 crores, the interest rate was nil up to 15 days beyond the due date, only 9 percent for payments made from 16-30 days after the deadline and the full 18 per cent was charged only if the payment was made on the 31st day and after.

For those taxpayers in the ‘Above 5 Crore’ category of AATO, the interest rate was 9 percent from 1-5 days beyond the due date, and 18 per cent from the 16th day onwards. GST Late payment fees were waived for an extended duration too.

All these relief measures on the part of the Government, were meant to enable all businesses, large and small, to ease their tax burdens while simultaneously complying with GST regulations.

All payments towards GST can be made online and it is simply a matter of adhering to the stipulated timelines – every business should easily be able to avoid any late payments or interests on GST returns.

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