Interest and Late Fee under GST – Judicial Trends
Statutory Framework
Interest on delayed payment of GST
Section |
Rate of interest p.a. |
Cause of interest |
Section 50(1) |
18% |
Interest liability on delayed payment of tax |
Section 50 (3) |
18% |
Input tax credit wrongly availed and utilised |
Manner of calculating interest on delayed payment of tax (Rule 88B of CGST Rules)
Rule |
Scenarios |
Value on which interest should be calculated |
Period on which interest should be calculated |
88B(1) |
When the supplies are made in October 2025 & GSTR-3B of October 2025 filed in January 2026 i.e. after the due date
Note: There will be no interest if amount has been credited in the Electronic Cash Ledger on or before the due date of filing GSTR-3B of October 2025 |
on the portion of tax which is paid by debiting the Electronic cash ledger |
For the period of delay in filing the GSTR-3B return beyond the due date |
88B(2) |
When the supplies are made in October 2025 but those invoices filed in GSTR-3B of January 2026
Or any other case |
on the amount of tax which remains unpaid |
for the period starting from the date on which such tax was due to be paid till the date such tax is paid |
88B(3) |
Wrongly availed & utilized Input Tax Credit |
on the amount of Input tax credit wrongly availed and utilized |
for the period starting from the date of utilisation of such wrongly availed Input tax credit till the date of reversal of such credit or payment of tax in respect of such amount |
In view of the above, Interest is compensatory in nature, meant to compensate for delay in remitting tax by the taxpayer beyond the due date.
It is usually charged at 18% per annum, subject to Government notification.
The law specifies interest on the net cash tax liability (i.e., tax payable after adjusting admissible input tax credit, debited via the electronic cash ledger).
Late fee for delayed filing of returns
Relevant Section— 47 of CGST Act—
Section |
Failure to file return |
Late fee |
Section 47(1) |
GSTR-3B, GSTR-1, etc. |
Any Registered person who fails to furnish GSTR-1, GSTR-3B, GSTR-10 & GSTR-8 by the due date shall pay a late fee of one hundred rupees for every day during which such failure continues subject to a maximum amount of five thousand rupees.
Waiver of late fee to certain amount on failure to file GSTR-3B— No. 19/2021–Central Tax Dated: 01st June, 2021
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Section 47(2) |
GSTR-9 & GSTR-9C |
As per Section 47(2) of CGST act, 2017 states that any Registered person who fails to furnish the return required under section 44 by the due date shall be liable to pay a late fee of one hundred rupees for every day during which such failure continues subject to a maximum of an amount calculated at a quarter per cent. of his turnover in the State or Union territory.
Waiver of late fee to certain amount on failure to file GSTR-9— Notification No.7/2023-CT dated 31.03.2023
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Judicial Precedents in favor of Assessee on Interest under GST
The High Court allowed the writ petition, setting aside the appellate order dated August 20, 2020, which confirmed the levy of Interest of Rs 59,35,528 under Section 50(3) of the CGST Act, 2017. It held that Interest could not be imposed as the petitioner had unutilized input tax credit (ITC) throughout the disputed period, rendering the adjustment towards Interest unjustified. [2024] 77 TAXLOK.COM 196 (Madras)
The petitioner challenged the recovery notice issued by GST authorities for Interest on belatedly filed returns, despite tax payments being deposited in the Electronic Cash Ledger on time. The petitioner argued that only credit adjustment was required, and recovery of Interest was unjustified. The Court directed the GST authorities to pass a fresh order, justifying the Interest liability and considering the petitioner’s contentions before any recovery action is enforced. [2024] 76 TAXLOK.COM 213 (Madras)
The petitioner challenged an order passed on 8th April 2021 under Section 73 of the CGST/WBGST Act, imposing Interest and penalties for wrongful availment of Input Tax Credit (ITC) for the tax period April 2018 to March 2019. The court found that the petitioner had not utilized the wrongfully availed ITC and quashed both the adjudication and appellate orders, concluding that Interest is only applicable when ITC is both availed and utilized. [2024] 74 TAXLOK.COM 364 (Calcutta)
The issue involved in the present mater i.e. whether any Interest can be levied under Section 50(3) of the West Bengal Goods and Service Tax Act 2017 in cases of wrong availment of Input of Tax Credit and reversal thereof, is no more res integra in view of Circular No. 192/04/2023 – GST, dated 17.7.2023 [2024] 70 TAXLOK.COM 051 (Calcutta)
Judicial Precedents in favor of Assessee on imposition of Late fee
The Madras High Court decided a batch of writ petitions challenging levy of late fee under section 47 and general penalty under section 125 of the GST Acts for delayed filing of annual returns in Form GSTR-9. The Court held that once late fee is levied under section 47, imposition of general penalty under section 125 for the same default is impermissible. However, the Court upheld the validity and prospective application of Notification No.7/2023-CT granting amnesty on late fee and ruled that its benefit cannot be extended retrospectively to assessees who filed returns before or after the notified amnesty period. Relief is granted only to the extent of setting aside dual penalties. [2026] 92 TAXLOK.COM 002 (Madras)
Madras High Court partly allowed the writ petition challenging levy of late fee and general penalty for non-filing of annual return. The Court held that once late fee is levied under Section 47, general penalty under Section 125 cannot be imposed. It also corrected erroneous computation of late fee and directed defreezing of bank account upon payment. [2025] 91 TAXLOK.COM 125 (Madras)
The petitioner challenged an order imposing a higher penalty under Section 47(2) of the CGST and SGST Acts for failure to file GSTR-9 for FY 2020–21. The Madras High Court held that penalty for such delay was excessive and violative of the principle that penalties should not be levied for technical or venial breaches. The impugned order is quashed and the matter remanded for fresh consideration with directions to impose a lesser penalty. [2025] 88 TAXLOK.COM 220 (Madras)
The petitioner challenged a GST demand order imposing both a late fee under Section 47 and a general penalty under Section 125 for delayed annual return filing. The court ruled that Section 47 specifically provides for late fees in such cases, making the general penalty inapplicable. Consequently, the Rs 50,000 penalty under Section 125 is set aside, while the late fee under Section 47 is upheld. The department is directed to revise the demand accordingly. [2025] 81 TAXLOK.COM 077 (Madras)
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