GST Penalties & Late Fees: Applicability, Interest, Penalties & Compliance Guide

Compliance with GST involves filing of returns, payment of tax within the stipulated time frame and proper record keeping. Non-compliance with the above may attract fines, interest, penalties, notices, etc., depending on the type of non-compliance.

What Are GST Penalties And Late Fees?

GST late fee is the amount that must be paid for non-filing of some GST forms by the prescribed due date.

GST interest becomes applicable in case some taxes or other amounts are not paid beyond the prescribed time period.

GST penalty can be levied in case of some contraventions or defaults made under GST law.

The amount of penalty depends upon the kind of default, GST law provision and the specific circumstances of the case.

Late Fees for GST

Under section 47 of the CGST Act, late fees are provided to be levied in respect of specified delays in furnishing GST details or returns.

This statutory provision provides a late fee of ₹100 per day for specified defaults up to the maximum limit. Provisions related to SGST/UTGST may also apply. Hence, late-fee liability may vary depending upon the type of return, taxpayer classification, and notification regarding reduction/waiver of late fees.

Late Fee for GST Return

The late fee may be applicable when the taxpayer fails to furnish the relevant GST return within the prescribed due date.

Relevant factors which determine the applicability of late fees include:

• Type of GST return
• Type of taxpayer
• Presence of tax liability
• Nature of return as NIL return
• Relevant provisions of CGST/SGST/UTGST
• Relevant notifications and waivers applicable for the concerned tax period

Taxpayers should check the relevant late-fee provisions before paying any late fee.

Interest Payable in Case of Late Payment of GST

There is a difference between late fee and interest.

Section 50 of the CGST Act states that in case of failure to pay tax or any part thereof by the person liable to pay the tax within the prescribed period, interest is payable for the period during which the tax is outstanding. The rate of interest would be as notified in the GST law.

Interest will be payable for the period starting from the day following the due date of payment of such tax.

Interest in Case of Late Filing of GST Return

In the case of late filing of GST return where tax is payable, interest may arise as per Section 50 of the CGST Act.

In such cases, the taxpayer must calculate the following:

• Tax liability
• Tax already paid
• Tax to be paid
• Interest
• Late Fee

before filing the delayed return.

Interest in Case of Improper Availing and Utilization of Input Tax Credit

In case input tax credit has been improperly availed and utilized, interest may arise at the rate specified in Section 50(3) of the CGST Act.

Hence, businesses need to reconcile GSTR-2B, purchase ledger and ITC availed in GSTR-3B.

Penalty Under GST

There can be penalties under GST in instances of default or contraventions under GST law.

Penalty will depend upon:

• Type of default
• Nature of tax
• Intentional or unintentional
• Fraud or suppression
• Payment of tax and interest
• Provisions of GST law
• Nature of the case

Penalty provisions must thus be considered on a case-by-case basis.

Common GST Penalties

Some of the common instances that could lead to penalty under GST are:

• Failure to file GST returns
• Inaccurate recording of transactions
• Underpayment of GST
• Non-payment of GST
• Mistaken claiming of ITC
• Improper utilization of ITC
• Lack of proper record keeping
• Incorrect invoicing
• Failure to meet e-invoicing obligations where applicable
• Other contraventions under GST law

Late Filing of GSTR-1

GSTR-1 includes details about outward supplies and needs to be submitted by those taxpayers who have such a filing requirement.

The late submission of the relevant form may attract late fees under the relevant provisions.

Late filing or any incorrect filing in GSTR-1 may also lead to reconciliation issues on behalf of customers as the invoices submitted in the relevant form will impact their GST liability and ITC.

Late Filing of GSTR-3B

GSTR-3B is the document which helps in the reporting of the relevant summary GST liability and ITC and also for payment of the relevant GST.

Any late filing of the GSTR-3B may result in the late fee or interest, as the case may be.

Taxpayers should make sure that:

• They reconcile sales
• They reconcile ITC
• Calculate GST liability
• Pay GST liability
• File GSTR-3B within the relevant due date

Late Filing of GSTR-9

GSTR-9 is an annual return which applies to eligible taxpayers.

In cases where GSTR-9 is to be filed and the taxpayer does not file the return before the prescribed due date, then applicable late fees provisions may arise. Section 47 provides provisions regarding late fees for annual returns.

GST Notice for Failure to File a Return

If a registered person fails to file a return, the proper officer may give a notice to the effect that he shall file the return.

Failure to file the return may lead to further actions as per GST regulations.

Non-Compliance Consequences

GST non-compliance may lead to:

• Late Fees
• Interest
• Penalty
• GST Notice
• Tax Demand
• ITC Consequences
• Other Compliance Actions
• Assessment or other GST Act action

The type of consequence will depend on the nature and duration of the default.

Difference Between Late Fee, Interest and Penalty

Particulars	Late Fee	Interest	Penalty
Purpose	For specified delay in furnishing returns/statements	Compensation for specified delayed payment or other specified cases	For specified contraventions/defaults
Main Trigger	Delay in filing	Delay in payment or other specified circumstances	Contravention of GST provisions
Depends On	Return, delay and applicable limits/notifications	Amount and period of delay and applicable rate	Nature and circumstances of default
Applicable Provision	Section 47	Section 50	Various provisions depending on default
Nature	Compliance-related charge	Time-related charge	Consequence for specified non-compliance

How to Avoid GST Penalties & Late Fees

A regular GST compliance process will help avoid GST penalties and late fees.

Step 1: GST Compliance Calendar

Keep the record of all dates where GST return needs to be filed and payments need to be done.

Step 2: Reconciliation of Sales

Compare the sales register and GSTR-1 along with books of accounts.

Step 3: Reconciliation of ITC

Compare purchases with GSTR-2B prior to availing eligible ITC.

Step 4: GST Liability Checking

Check the output GST, Reverse Charge GST, ITC and other liabilities.

Step 5: Pay GST Within the Time Limit

Pay the liability of GST within the required time limit.

Step 6: GST Return Filing

File the applicable GST returns within the required time limit.

Step 7: Maintain Appropriate Record

Maintain appropriate record of invoices, purchase, sales, GST return, challan and reconciliation report.

GST Compliance Errors that Organizations Should Avoid

They should ensure that they don’t commit:

• Submission of GST Returns after deadlines
• Late GST payment
• Erroneous GST Calculation
• Erroneous GSTIN
• Applying wrong tax rate
• Wrong place of supply
• Ineligible ITC claim
• Duplicated ITC claim
• Reverse not done on ineligible ITC
• Non-reconciliation of GSTR-2B
• Incorrect GSTR-1 reporting
• Differences in reporting on GSTR-1 and GSTR-3B
• Not maintaining required GST records

GST Documentation

Organizations should keep:

• Sales Invoices
• Purchase Invoices
• Credit Notes
• Debit Notes
• GSTR-1
• GSTR-3B
• GSTR-2B
• GST Payment Challans
• Bank Statements
• Purchase Register
• Sales Register
• ITC Reconciliation
• E-Invoices, wherever applicable
• E-Way Bills, wherever applicable

Frequently Asked Questions

What would happen if GST return filing was delayed?

Penalties may apply in case of delay in GST return filing and interest may also be chargeable where tax remains unpaid, as per applicable GST provision.

Is interest and late fee same under GST?

No. Late fee applies to delays in supplying GST particulars or returns, while interest mainly applies to delay in payment of tax and other certain specified situations.

Can late fees for GST be waived?

Government may specifically waive off or grant reduction in GST late fees through respective notifications. Therefore, the notification pertaining to the respective tax period needs to be referred.

Is interest chargeable on late GST payment?

Yes, in case of non-payment of tax or part thereof after the prescribed period, interest may be charged as per Section 50 and applicable notified rate of interest.

Is penalty applicable under GST?

Yes. Penalties can be applicable in case of contravention of certain provisions of the GST Act as specified. The applicable penalties depend upon the nature of the default.

Conclusion

GST penalties, late fees and interest are significant considerations related to GST compliance. Businesses must consider not only the GST returns filing but also make efforts to report accurately, pay GST liability on time and reconcile the records of GST.

Reconciliation of GSTR-1, GSTR-2B, GSTR-3B and the books of accounts by businesses will help in spotting discrepancies and avoid compliance issues.

It is necessary for businesses to monitor GST due dates and take necessary steps to keep track of latest provisions of GST and applicable notifications before taking any final decision regarding compliance.

For GST Registration, GST Return Filing, GST Reconciliation, GSTR-1, GSTR-3B, GSTR-2B and other GST Compliance services, contact us at Elite Tax Plus.