Library / Goods and Services Tax: The Professional's Master Guide

Appendix M: Interest, Late Fee and Penalty Ready Reckoner

Interest compensates the Government for delay. Late fee is a fixed charge for filing a return late. Penalty punishes a breach. The three are separate, so a single default can attract all three.

Item	Rate or amount	Section
Tax paid late	18% a year on net cash portion	s. 50(1)
ITC wrongly availed and utilised	18% a year from utilisation	s. 50(3); r. 88B
Delayed refund	6% a year after 60 days (9% where refund follows an appellate or court order)	s. 56
GSTR-1, GSTR-3B late fee	Rs. 50 a day (Rs. 20 for nil); caps Rs. 500 nil, Rs. 2,000 up to Rs. 1.5 crore, Rs. 5,000 up to Rs. 5 crore, Rs. 10,000 above	s. 47
GSTR-9 late fee	Rs. 50, 100 or 200 a day by turnover; cap 0.04% (up to Rs. 20 crore) or 0.5% (above)	s. 47
Specified offences	Rs. 10,000 or tax involved, whichever higher	s. 122(1)
Track and trace breach	Rs. 1 lakh or 10% of tax payable, whichever higher	s. 122B
General penalty	Up to Rs. 25,000	s. 125
Minor breach (tax under Rs. 5,000) or easily rectified error	No penalty	s. 126
Non-fraud demand (FY 2024-25 onwards)	10% of tax or Rs. 10,000, higher; nil if paid within 60 days of notice	s. 74A
Fraud demand (FY 2024-25 onwards)	100% of tax; 15%, 25% or 50% on early payment	s. 74A
Detention, owner comes forward	200% of tax (exempt goods: 2% of value or Rs. 25,000, lower)	s. 129
Detention, owner not forward	Higher of 50% of value or 200% of tax (exempt goods: 5% of value or Rs. 25,000, lower)	s. 129

The illustrations below apply these figures.

Illustration 230: Interest on late payment of tax

Sharma Textiles Pvt. Ltd. had output tax of Rs. 6,40,000 for August 2026, of which Rs. 4,00,000 was set off from ITC. The balance was paid in cash 24 days after the due date.

Step 1: Cash portion = Rs. 6,40,000 less Rs. 4,00,000 = Rs. 2,40,000.

Step 2: Interest = Rs. 2,40,000 x 18% x 24/365 = Rs. 2,840.55, say Rs. 2,841.

Interest is not charged on the part set off from credit, because that tax was already with the Government.

Illustration 231: Late fee on GSTR-3B

Kavya Enterprises (turnover Rs. 3 crore) filed GSTR-3B 47 days late.

Step 1: 47 days x Rs. 50 = Rs. 2,350 (CGST Rs. 1,175 + SGST Rs. 1,175).

Step 2: Cap for turnover between Rs. 1.5 crore and Rs. 5 crore is Rs. 5,000. Late fee payable = Rs. 2,350, in cash.

Illustration 232: Interest on ITC wrongly availed and utilised

Mehta and Co. claimed ineligible ITC of Rs. 1,50,000 in the GSTR-3B filed on 20 July 2026. Its credit balance fell below Rs. 1,50,000 on the same day because of set-off. It reversed the credit on 15 October 2026.

Step 1: Period from 20 July 2026 to 15 October 2026 = 87 days.

Step 2: Interest = Rs. 1,50,000 x 18% x 87/365 = Rs. 6,435.62, say Rs. 6,436.

Had the balance never fallen below Rs. 1,50,000, the credit would not be treated as utilised and no interest would arise under rule 88B.

Illustration 233: Late fee on GSTR-9

Arora Foods Pvt. Ltd. (turnover Rs. 12 crore) filed GSTR-9 for FY 2025-26 on 9 February 2027, 40 days after 31 December 2026.

Step 1: Rate for turnover between Rs. 5 crore and Rs. 20 crore = Rs. 100 a day. 40 x Rs. 100 = Rs. 4,000 (Rs. 2,000 + Rs. 2,000).

Step 2: Cap = 0.04% of Rs. 12 crore = Rs. 48,000. Late fee payable = Rs. 4,000.

Illustration 234: Penalty under section 74A

Case 1, no fraud: tax demanded Rs. 3,20,000. Penalty = higher of 10% (Rs. 32,000) and Rs. 10,000 = Rs. 32,000. If tax and interest are paid within 60 days of the notice, penalty is nil.

Case 2, fraud: tax demanded Rs. 5,00,000. Penalty is Rs. 75,000 (15%) if paid before notice; Rs. 1,25,000 (25%) if paid within 60 days of notice; Rs. 2,50,000 (50%) if paid within 60 days of the order; otherwise Rs. 5,00,000 (100%).

Weigh early payment against the strength of the defence before the 60 days pass.