Indirect Tax Laws · Payment of Tax

Instalment Order, Interest and Default Consequences under GST

Updated 5 October 2026 · Fact-checked

Under section 80 and Rule 158, a taxable person applies in FORM GST DRC-20. The Commissioner allows or rejects it by a reasoned order in FORM GST DRC-21. The facility is not available for tax already collected but not deposited, or for fraud, wilful misstatement or suppression cases under section 74. Interest runs under section 50 on the unpaid tax. If any one instalment is missed, the whole outstanding balance falls due at once and is recovered under section 79.

Understand Instalment Order, Interest and Default Consequences

Sometimes a taxable person cannot pay the full tax due at once. The law lets the department give relief. The Commissioner can extend the due date, or allow payment in monthly instalments, for reasons recorded in writing. The relief is a favour on application, not a right. It is not automatic.

The facility has limits. It is not available where the taxable person has already collected the tax from the recipient but has not deposited it. It is also not available where the tax relates to fraud, wilful misstatement or suppression of facts, the cases covered by section 74. Check these exclusions before you discuss instalments.

The process is simple. You file an application in FORM GST DRC-20 with your reasons. The Commissioner may ask the jurisdictional officer for a report. He then passes an order in FORM GST DRC-21 that either grants the facility or rejects the request. A grant fixes the amount, the number of instalments and the due dates. The maximum is 24 monthly instalments.

The facility is not free. The tax is still late, so interest under section 50 is payable on the amount that remains unpaid, for the period it remains unpaid. As each instalment reduces the balance, the interest base falls. The Commissioner may also attach conditions to the order.

The default rule is strict. If you miss even one instalment on its due date, the entire outstanding balance becomes due and payable forthwith. No fresh notice is needed. The proper officer can then recover it under section 79. You lose the benefit of the remaining instalments.

Students often confuse the two forms of relief. Extension of time (deferred payment) moves the single due date to a later date. Instalment payment splits the amount into several dated parts. Both come from the same provision and both carry interest. The default rule above is stated for instalments.

Key rules to remember

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.

How to solve Instalment Order, Interest and Default Consequences questions

Use this method for any question on the instalment facility, whether it asks about the order, the interest or the default.

1Check that the facility is available: the tax must not be tax already collected but not deposited, and must not be a fraud, wilful misstatement or suppression case under section 74.
2Identify the relief sought: extension of due date or payment in instalments. Check that the number of instalments is within 24 and monthly.
3State the procedure: application in FORM GST DRC-20 to the Commissioner, report if called for, and a reasoned order in FORM GST DRC-21.
4List the outstanding tax and the instalment schedule with each due date.
5Compute interest under section 50 for each period on the balance outstanding during that period: the balance after earlier instalments and before the instalment due at the end of that period.
6Check each instalment against its due date. Find the first missed one, if any.
7On default, state that the whole outstanding balance becomes due at once, without notice, and is recoverable under section 79. Compute interest up to the default date on the reducing balance, then add interest on the balance due after default until payment.
8Give the final figure and a one-line conclusion in provision, facts, conclusion form.

Quickest way: Four-line check for numerical questions

When to use it: Use it when the question gives a schedule of instalments and asks for interest or the amount recoverable on default.

Write the balance outstanding in each period in a small column. It falls only after an instalment is paid.
Multiply each balance by rate × time (months ÷ 12 or days ÷ 365) and add up.
Scan the payment dates. The first late payment is the default date.
On default, sum all unpaid instalments. That sum is due immediately. Interest up to default is computed separately on the reducing balance. Interest on the sum runs from the default date.

Common mistakes in Instalment Order, Interest and Default Consequences

Saying the instalment facility is a right of the taxpayer.
Students read it as a relief provision and assume it is automatic.
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.
The word relief suggests no cost.
Fix: Always add that interest under section 50 is payable on the unpaid tax. Compute it on the reducing balance.
Saying only the missed instalment becomes due on default.
Students think the default affects only that one instalment.
Fix: The whole outstanding balance falls due forthwith. No notice is required. Recovery is under section 79.
Computing interest on the full original tax for the full period.
Students forget that the base falls after every instalment.
Fix: Interest for each period is on the balance outstanding during that period. Deduct an instalment from the balance only from the date it is paid.
Treating extension of time and instalments as the same thing.
Both come under the same provision and both are called deferred payment.
Fix: Extension moves one due date. Instalments split the amount into up to 24 monthly parts. The forthwith-default rule is written for instalments.
Allowing the facility for tax already collected from the recipient or for section 74 fraud cases.
Students remember the relief but forget its exclusions.
Fix: State that the facility is not available for tax collected but not deposited, or for fraud, wilful misstatement or suppression cases under section 74.

Worked examples

Example 1

Mehta Traders owes ₹1,20,000 of tax, which was due on 20 March. On its application, the Commissioner allows four equal monthly instalments of ₹30,000 payable on 20 April, 20 May, 20 June and 20 July. All are paid on time. Compute the interest at 18% p.a., treating each month as one full month.

Show the solution

Balance from 20 March to 20 April = ₹1,20,000. Interest = 1,20,000 × 18% × 1/12 = ₹1,800.
After the first instalment the balance is ₹90,000. Interest for the next month = 90,000 × 18% × 1/12 = ₹1,350.
After the second instalment the balance is ₹60,000. Interest = 60,000 × 18% × 1/12 = ₹900.
After the third instalment the balance is ₹30,000. Interest = 30,000 × 18% × 1/12 = ₹450.
Total interest = 1,800 + 1,350 + 900 + 450 = ₹4,500.

Answer: Interest under section 50 is ₹4,500. Total outflow is ₹1,20,000 + ₹4,500 = ₹1,24,500.

Example 2

Rao Industries is allowed to pay ₹6,00,000 of tax (not tax collected but undeposited, and not a section 74 case) in six equal monthly instalments of ₹1,00,000. The tax was due on 20 January, and the instalments fall due on 20 February, 20 March, 20 April, 20 May, 20 June and 20 July. It pays the first two on time but misses the third due on 20 April. What is the legal position, and how much is immediately payable? Compute interest up to the default date, and then interest at 18% p.a. if the balance is paid two months after the third due date. Treat each month as one full month.

Show the solution

Provision: under section 80 and Rule 158, a default in any one instalment makes the whole outstanding balance payable forthwith, without notice.
Instalments paid = 2 × ₹1,00,000 = ₹2,00,000. Outstanding = 6,00,000 − 2,00,000 = ₹4,00,000.
Proper officer can recover ₹4,00,000 under section 79. Rao loses the benefit of the remaining instalments.
Interest up to default, on the reducing balance: 20 January to 20 February on ₹6,00,000 = 6,00,000 × 18% × 1/12 = ₹9,000. 20 February to 20 March on ₹5,00,000 = ₹7,500. 20 March to 20 April on ₹4,00,000 = ₹6,000. Total = 9,000 + 7,500 + 6,000 = ₹22,500.
Interest after default on the balance of ₹4,00,000 for two months = 4,00,000 × 18% × 2/12 = ₹12,000.
Total interest = 22,500 + 12,000 = ₹34,500.

Answer: The whole outstanding ₹4,00,000 is due immediately and is recoverable under section 79. Interest up to the default date is ₹22,500 and interest for the two months after default is ₹12,000, so total interest is ₹34,500.

Exam tips

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.
In a theory answer, give the default rule in one sentence: one missed instalment, whole balance due forthwith, no notice, section 79.
In numerical questions, show the reducing-balance table. Marks go for method even if the final figure is slightly off.
In case-scenario MCQs, watch for options that say only the missed instalment is due or that interest is waived. Both are wrong.
Use the phrase deferred payment carefully. Say extension of time or instalments, and then name which one the facts describe.

Practice questions from Payment of Tax

Instalment Order, Interest and Default Consequences: frequently asked questions

What happens if I default on a GST instalment under Rule 158?

The whole outstanding balance becomes due and payable at once, without any notice. The proper officer can recover it under section 79. Interest continues on the unpaid amount.

Is interest payable on tax paid in instalments under CGST?

Yes. Interest under section 50 is payable on the tax that remains unpaid, for the period it remains unpaid. Compute it for each period on the balance outstanding during that period.

What is the difference between deferred payment and instalment payment under GST?

Deferred payment means the Commissioner extends the due date to one later date. Instalment payment splits the amount into dated parts, up to 24 monthly instalments. Interest is payable in both cases.

Who decides the instalment application and in which form?

You apply to the Commissioner in FORM GST DRC-20. He may call for a report and then passes a reasoned order in FORM GST DRC-21 allowing or rejecting the request.

Can I get instalments for tax I have already collected from customers?

No. The facility is not available where the tax has been collected from the recipient but not deposited. It is also not available for fraud, wilful misstatement or suppression cases under section 74.