CA Final · Indirect Tax Laws

Payment of Tax: formula sheet

Full chapter guide

Key formulas

Maximum number of instalments: Instalments ≤ 24 monthly instalments; The Commissioner may allow fewer. Anything beyond 24 months cannot be allowed.
Excluded amounts: No instalments for amounts payable under sections 62, 63, 64, 67, 73, 74, 129 and 130 (section 80 as amended w.e.f. 1 Oct 2023); A demand under section 73 or 74 therefore cannot be paid in instalments. Check the source of the dues first.
Application: Electronic application in FORM GST DRC-20 to the Commissioner; State the amount, the ground (financial hardship, with the reasons for your inability to pay) and the instalments you want.
Order: Order in FORM GST DRC-21 allowing payment in instalments, subject to conditions, or rejecting the request; The Commissioner may call for a report from the jurisdictional officer and, after considering that report, may allow instalments by the order.
Interest: Interest under section 50 (18% p.a.) on the outstanding amount of tax, for the period it remains unpaid; Instalments do not stop interest. The facility is not interest-free. The outstanding amount reduces as each instalment is paid, so the interest on it reduces too.
Default rule: Default in any one instalment ⇒ entire outstanding balance due forthwith; The balance then becomes liable to recovery. This consequence is provided in section 80, and Rule 158 gives the procedure.
Legal source: Section 80 of the CGST Act (power) + Rule 158 of the CGST Rules (procedure); Quote both when answering in provision-facts-conclusion form.
Authority and forms: Application: FORM GST DRC-20 → Order: FORM GST DRC-21; Application goes to the Commissioner. The order must give reasons in writing, whether it grants or rejects.
Maximum number of instalments: Instalments ≤ 24 monthly instalments; The Commissioner may also choose to only extend the due date instead.
Interest on outstanding tax: Interest = Outstanding tax × Rate % p.a. × Days ÷ 365; Charged under section 50. The rate is the one notified for delayed payment of tax, currently 18% p.a. Compute separately for each period on the balance outstanding during that period, that is, the balance after earlier instalments and before the instalment due at the end of the period.
Default consequence: One instalment missed ⇒ whole balance due forthwith ⇒ recovery under section 79; No notice is needed before the balance falls due. Interest continues on the unpaid balance.
Maximum period: Instalments ≤ 24 monthly instalments; Section 80 allows an extension of time or monthly instalments, not exceeding twenty-four. The Commissioner may grant fewer.
Excluded amount: Amount due as per liability declared in return → no instalment facility; Self-assessed tax shown in the return must be paid on time. Instalments are for other dues, such as demands by order.
Interest condition: Instalment facility = relief on timing + interest under section 50 on the tax amount for the extension or instalment period; Section 80 itself provides for interest under section 50 on the tax amount for the period of extension or instalments. Rule 158 prescribes the procedure. The facility does not waive this interest.
Condition for the facility: Taxpayer unable to pay the amount due + application with reasons → Commissioner may allow; The application states the reasons for inability to pay. Without that, the Commissioner has no basis to grant the facility.
Protection during the facility: Extension or instalment period → no recovery proceedings for that amount; The protection lasts only while you comply with the terms.
Default rule: Default in any one instalment → entire outstanding balance payable forthwith and recoverable without further notice (proviso to section 80); This is the proviso to section 80. Recovery then follows under section 79, the general recovery provision for arrears.
Procedure: Application in FORM GST DRC-20 → Commissioner's order in FORM GST DRC-21; Under Rule 158(2), the Commissioner may call for a report from the jurisdictional officer before deciding. Reasons for the decision are recorded in writing.

Quick revision

The Commissioner may, on the taxable person's request and for reasons recorded in writing, allow an amount due under a notice or order to be paid in instalments where extraordinary circumstances make payment in one go impossible (Section 80 CGST Act).
The order specifies the number of monthly instalments, up to a maximum of 24, in the Commissioner's discretion.
You apply electronically on the common portal in FORM GST DRC-20.
The Commissioner may call for a report and may give you a chance to be heard before passing the order.
The order either allows the request in FORM GST DRC-18 or rejects it in FORM GST DRC-19.
Interest at the rate notified under Section 50(1) (currently 18% a year) is payable on the amount payable in instalments, as per the order. Instalment permission does not waive it.
If you default on any one instalment on its due date, the whole outstanding balance becomes due and payable at once.
After such default, the balance is recoverable without any further notice, and interest at the notified Section 50(1) rate continues until payment.
Amounts collected as tax or self-assessed in returns (the declared liability in GSTR-3B or GSTR-1) are not eligible for the facility.
In a case question, check eligibility first, then the order, then interest, then default.
Write answers in provision, facts, conclusion form.

Common mistakes

Treating instalment payment as the taxpayer's right. Fix: Write that the Commissioner may allow it on your request, only on being satisfied that payment would cause financial hardship. The request can also be rejected.
Saying interest is waived during the instalment period. Fix: State that interest under section 50 is payable on the outstanding amount of tax, in addition to the instalments.
Saying the instalment facility is a right of the taxpayer. Fix: State that it is granted by the Commissioner on application, for reasons recorded in writing. He may also reject it.
Saying instalments are interest-free. Fix: Always add that interest under section 50 is payable on the unpaid tax. Compute it on the reducing balance.
Allowing instalments on tax shown in GSTR-3B but not paid. Fix: Remember the exclusion: the amount due as per the liability declared in the return is outside section 80. It must be paid on the due date, with interest if late.
Writing that the facility waives or reduces interest. Fix: Write that section 80 provides for interest under section 50 on the tax amount for the extension or instalment period. Rule 158 only prescribes the procedure. Instalments only change the timing of payment.

Exam tips

Write the section 80 power and the Rule 158 procedure together. Examiners reward naming both.
Memorise the numbers: 24 monthly instalments, DRC-20 for application, DRC-21 for order.
Use the right ground: financial hardship and inability to pay. Never write 'extraordinary circumstances'.
In case scenarios, check the facts for a missed instalment. That usually signals the acceleration (whole balance due) rule.
Check the exclusions: after the 2023 amendment, section 80 does not allow instalments for amounts payable under sections 62, 63, 64, 67, 73, 74, 129 and 130. A demand order under section 73 or 74 is therefore outside the facility.
In MCQs, watch for options that say 'interest-free' or 'automatic'. Both are wrong.
Write the two form numbers, DRC-20 and DRC-21, and the Commissioner as the deciding authority. Examiners reward them.
Mention the exclusions: tax collected but not deposited, and section 74 fraud, wilful misstatement or suppression cases.