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Taxation · Payment of Tax

Interest on Delayed Payment and Excess Claims under Section 50 of CGST

Updated 4 October 2026 · Fact-checked

Section 50 of the CGST Act charges interest when you pay GST late (18% a year, on the portion paid through the cash ledger) or when you wrongly avail and utilise input tax credit (24% a year). Compute it as amount × rate × days ÷ 365.

Understand Interest on Delayed Payment and Excess Claims

GST is due by a fixed date. If you pay after that date, the government has lost the use of its money. Interest under section 50 compensates for that delay. It is not a penalty. It runs automatically, with no notice or order needed.

There are two situations. First, delayed payment of tax: you were liable to pay tax but did not pay by the due date. The notified rate is 18% per annum. Second, undue or excess claim of ITC (or undue or excess reduction in output tax liability): you took credit you were not entitled to. The notified rate is 24% per annum.

The most tested point is the net cash liability rule. If your output tax is ₹5,00,000 and ITC of ₹3,50,000 was available in your electronic credit ledger on the due date and is used to pay part of it, the balance of ₹1,50,000 is the portion paid in cash. As per the proviso to section 50(1), interest on late payment is charged on the portion of the tax payable that is paid by debiting the electronic cash ledger, net of the ITC that was available in the electronic credit ledger on the due date. It is not charged on the gross output tax. The credit was already sitting in your ledger. If the ITC was not available on the due date, you cannot treat that part as settled by credit.

For excess ITC, section 50(3), as substituted by the Finance Act, 2022 (effective retrospectively from 1 July 2017), charges interest at 24% on ITC that was wrongly availed and utilised, or on an undue or excess reduction of output tax liability. Merely taking the credit in the electronic credit ledger does not trigger interest. The interest period runs from the date of utilisation to the date of reversal or payment of the amount.

To count the days, the usual convention in calculations is to leave out the starting day (the due date for late tax, the utilisation date for excess ITC) and include the day of payment or reversal. This is a conventional method of calculation, not a rule stated in the section. Use it unless the question gives its own day count. Always read the question for the due date, the actual payment date and whether the delay is in cash or credit.

Key rules to remember

Interest on delayed payment of tax
Interest = Tax paid late (net cash liability) × 18% × Days of delay ÷ 365
By the usual counting convention, days run from the day after the due date up to the date of payment. Rate is as notified under section 50(1).
Interest on wrongly availed and utilised ITC
Interest = ITC wrongly availed and utilised × 24% × Days ÷ 365
Under section 50(3), as substituted by the Finance Act, 2022 (effective retrospectively from 1 July 2017), interest runs from the date of utilisation to the date of reversal or payment. For the day count, the usual convention is to exclude the utilisation day and include the reversal or payment day. This is a calculation convention, not a statutory rule. The same 24% applies to undue or excess reduction of output tax liability.
Net cash liability
Net cash liability = Output tax liability − ITC available in the electronic credit ledger on the due date and utilised
As per the proviso to section 50(1), interest at 18% is charged on the portion of tax payable that is paid by debiting the electronic cash ledger, net of ITC that was available in the electronic credit ledger on the due date.
Which rate applies
Late payment of tax → 18%; Excess or undue ITC claim → 24%
Check what went wrong in the question before picking the rate.

How to solve Interest on Delayed Payment and Excess Claims questions

Use the same method for any section 50 question. Decide the type of default first, then the base, then the days.

  1. 1Identify the default: late payment of tax (18%) or wrongly availed and utilised ITC (24%).
  2. 2For late payment, find the output tax liability and subtract the ITC that was available in the credit ledger on the due date and utilised. The balance is the net cash liability, the interest base.
  3. 3Fix the start date. For late tax, interest runs from the due date, and by the usual convention you count from the day after it. For excess ITC, it runs from the date of utilisation.
  4. 4Fix the end date: the date of actual payment, or the date of reversal for ITC.
  5. 5Count the days carefully, month by month, using the usual convention (leave out the starting day, include the end day) unless the question says otherwise. Use 365 days for the year.
  6. 6Apply amount × rate × days ÷ 365 and round to the nearest rupee.
  7. 7If tax is of different heads (CGST, SGST, IGST), compute per head only when delays or amounts differ, else compute on the total.
  8. 8Write the answer with a one-line statement of the section and rate used.

Quickest way: Rate, base, days in 30 seconds

When to use it: Use this for MCQs and for the first lines of a written answer when time is short.

  1. Read the keywords. 'Paid late' means 18%. 'Wrongly availed and utilised' or 'excess claim' means 24%.
  2. For late payment, cut the base to cash paid. Ignore the part settled by ITC that was available on the due date.
  3. Count days by the usual convention: skip the start date (due date or utilisation date), include the payment or reversal date. This is a calculation convention, so follow any day count the question gives.
  4. Simplify the fraction before multiplying, for example 18% × 20 ÷ 365.
  5. MCQ trick: an option that charges 18% on the gross output tax is a trap. An option using 24% for late payment is also a trap.
  6. In a written answer, show four lines: default, base, days, formula. These earn the step marks even if arithmetic slips.

Common mistakes in Interest on Delayed Payment and Excess Claims

  • Charging 18% interest on the gross output tax liability.

    Students forget that part of the tax was settled through ITC, which was available on time.

    Fix: Subtract the ITC available on the due date and utilised first. Charge interest only on the net cash liability paid late.

  • Using 18% for excess ITC claims, or 24% for late tax payment.

    The two rates are easy to swap in memory.

    Fix: Link the rates to the default: late payment is 18%, excess ITC is 24%. Higher rate for the more serious default.

  • Charging interest on ITC from the date it was availed, even though it was not used.

    Students assume taking credit alone triggers interest.

    Fix: Under section 50(3), 24% interest applies to ITC wrongly availed and utilised (or undue or excess reduction of output tax liability). Start counting from the date of utilisation to the date of reversal or payment.

  • Counting the due date itself as a day of delay.

    Day counting by habit starts from the due date.

    Fix: By the usual calculation convention, start from the day after the due date and include the day of payment. Follow the question if it gives a different day count.

  • Treating interest as a penalty or late fee.

    All three appear together in return compliance topics.

    Fix: Interest is compensation for delay and is charged at a rate on the amount. Late fee is a fixed amount for delay in filing returns. Penalty is separate.

  • Using 360 days or 12 months for the year.

    Borrowed from loan interest calculations.

    Fix: Use days ÷ 365 as the standard in GST problems.

Worked examples

Example 1

For the tax period May, Rohan Traders has IGST output tax liability of ₹5,00,000. The return and tax for May were due on 20 June. ITC of ₹3,50,000 was available in the electronic credit ledger on the due date and is utilised. The balance tax was paid in cash on 10 July, which is 20 days after the due date. Compute interest under section 50.

Show the solution
  1. Default: delayed payment of tax, so the rate is 18%.
  2. Net cash liability = ₹5,00,000 − ₹3,50,000 = ₹1,50,000. Interest is charged only on this amount paid in cash, because the ITC was available in the credit ledger on the due date.
  3. Delay = 20 days. By the usual counting convention, count from the day after the due date (21 June) to the date of payment (10 July): 10 days in June plus 10 days in July.
  4. Interest = ₹1,50,000 × 18% × 20 ÷ 365.
  5. = ₹27,000 × 20 ÷ 365 = ₹5,40,000 ÷ 365 = ₹1,479.45, rounded to ₹1,479.

Answer: Interest payable is ₹1,479. Charging on the gross ₹5,00,000 would give about ₹4,932, which is wrong.

Example 2

Meera Ltd wrongly availed ITC of ₹2,00,000 on 10 June. It utilised this credit on 20 June to pay output tax. On discovering the error, it paid back the amount on 20 July by debiting the electronic cash ledger (or by reversal in GSTR-3B). Compute the interest under section 50, assuming the rate is 24%.

Show the solution
  1. Default: wrongly availed ITC which has also been utilised, so section 50(3) applies at 24%.
  2. Interest starts from the date of utilisation, 20 June, not from the date of availing, 10 June.
  3. Day count, using the usual calculation convention: leave out the utilisation day (20 June) and include the payment day (20 July). So count 21 June to 20 July: 10 days in June (21 to 30 June) plus 20 days in July = 30 days.
  4. Interest = ₹2,00,000 × 24% × 30 ÷ 365.
  5. = ₹48,000 × 30 ÷ 365 = ₹14,40,000 ÷ 365 = ₹3,945.21, rounded to ₹3,945.

Answer: Interest payable is ₹3,945. No interest arises for 10 to 20 June because the credit was not utilised in that period.

Exam tips

  • Always state the section (section 50) and the rate you use. It earns marks even if the numbers go wrong.
  • Look for the phrase 'net cash liability' or a split between ITC and cash. Questions are built to test the proviso.
  • In excess ITC questions, check whether the credit was utilised. If it was only availed and unused, say that no interest arises under section 50(3).
  • Show the day count line by line (June 10 days, July 20 days) and state the convention you used. Examiners give step marks for it.
  • Keep interest, late fee and penalty separate in theory answers. Do not mix their rates.

Practice questions from Payment of Tax

Interest on Delayed Payment and Excess Claims in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

Interest on Delayed Payment and Excess Claims: frequently asked questions

What is the rate of interest on delayed payment of GST?

The notified rate is 18% per annum under section 50(1) of the CGST Act. It runs for the period the tax remains unpaid after the due date. In calculations, days are usually counted from the day after the due date to the date of actual payment.

On what amount is interest on late GST payment charged?

As per the proviso to section 50(1), it is charged on the portion of the tax payable that is paid by debiting the electronic cash ledger. This is net of the ITC that was available in the electronic credit ledger on the due date. The part settled by such available ITC is excluded.

What is the interest rate when ITC is wrongly claimed?

The notified rate is 24% per annum under section 50(3), as substituted by the Finance Act, 2022 (effective retrospectively from 1 July 2017). It applies to ITC wrongly availed and utilised, or to undue or excess reduction of output tax liability, and runs from the date of utilisation to the date of reversal or payment.

Is interest under section 50 the same as late fee?

No. Interest is a time-based charge on the amount of tax unpaid or credit wrongly used. Late fee is a fixed amount per day for delay in filing a return.

How many days do I take in a year for the calculation?

Use 365 days. Compute the amount × rate × number of days ÷ 365 and round to the nearest rupee.