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Goods and Services Tax (GST) and Corporate Tax Planning · Procedural Compliance under GST

GST Returns and Payment of Tax: Late Fee, Interest and Ledgers

Updated 11 October 2026 · Fact-checked

GST returns are periodic statements of supplies, tax and credit that a registered person files. Tax is paid through the electronic cash ledger or credit ledger under section 49. Delay attracts late fee under section 47 and interest under section 50. Solve questions by finding the liability, applying the ledger utilisation order, then computing fee and interest.

Understand Returns and Payment of Tax

A GST return is a statement filed on the common portal. It reports your outward supplies, the input tax credit you claim and the tax you pay. Returns are filed by registered persons, and the form depends on who you are and what you do. Examples are the outward supply statement (GSTR-1), the monthly or quarterly summary return with payment (GSTR-3B), and the annual return (GSTR-9). Check the current due dates and forms notified by the Government, because they change by notification.

Payment runs through three ledgers under section 49. Every deposit by internet banking, cards, NEFT, RTGS or another prescribed mode goes to the electronic cash ledger. The date the money is credited to the Government's account in the authorised bank is treated as the date of deposit. Input tax credit self-assessed in your return goes to the electronic credit ledger. All your liabilities are recorded in the electronic liability register.

Cash can pay tax, interest, penalty, fees or any other amount. Credit can pay only output tax, under the CGST Act or the IGST Act. It cannot pay interest, penalty or late fee. This is a favourite exam trap.

Section 49(5) fixes the order of using credit. IGST credit is used first for IGST, then CGST, then SGST or UTGST, in that order. CGST credit is used for CGST first, then IGST. SGST credit is used for SGST first, then IGST. UTGST credit follows the same pattern. CGST credit can never pay SGST or UTGST, and SGST or UTGST credit can never pay CGST.

If you pay late or file late, two charges arise. Late fee under section 47 is a fixed daily amount. Interest under section 50 is charged on the tax itself for the period it stays unpaid. You pay interest on your own, without waiting for a notice.

Key rules to remember

Late fee for GSTR-1, GSTR-3B and similar returns (s. 47(1))
Late fee = ₹100 × days of delay, capped at ₹5,000
₹100 per day of failure for the return or outward details due under section 37, 39, 45 or 52. Check notifications for reduced fee rates, which may apply by turnover or nil returns.
Late fee for annual return (s. 47(2))
Late fee = ₹100 × days of delay, capped at 0.25% of turnover in the State or Union territory
Applies to the annual return under section 44.
Interest on delayed tax (s. 50(1), (2))
Interest = Tax unpaid × rate × days ÷ 365
Rate cannot exceed 18% a year and is notified by the Government. It runs from the day after the due date. Use the notified rate given in the question.
Interest on wrongly availed and utilised ITC (s. 50(3))
Interest rate not exceeding 24% a year
Applies where ITC is wrongly availed and also utilised. Rate is notified.
Order of utilising ITC (s. 49(5))
IGST → IGST, CGST, SGST/UTGST. CGST → CGST, IGST. SGST → SGST, IGST. UTGST → UTGST, IGST
CGST credit cannot pay SGST or UTGST. SGST or UTGST credit cannot pay CGST. SGST or UTGST credit pays IGST only where CGST credit balance is not available.
Order of discharge of dues (s. 49(8))
(a) Self-assessed tax and other dues of earlier periods; (b) self-assessed tax and other dues of the current period; (c) any other amount, including demands under section 73, 74 or 74A
Tax dues mean tax only. Other dues mean interest, penalty, fee and any other amount.
Assessment of non-filers (s. 62)
Assessment order within 5 years from the annual return due date for the year. Valid return within 60 days of service withdraws the order
A further 60 days is allowed on an additional late fee of ₹100 per day after the first 60 days. Interest and late fee still continue.

How to solve Returns and Payment of Tax questions

Use this sequence for any problem on returns, late fee, interest or payment of tax.

  1. 1Identify the return involved and its due date, using the date given in the question or the notified date.
  2. 2Count the days of delay. Start from the day after the due date, and include the day of filing or payment as the facts indicate.
  3. 3Compute the late fee at ₹100 per day. Apply the cap of ₹5,000, or 0.25% of turnover for the annual return.
  4. 4Compute interest on the unpaid tax only, not on the late fee. Use the given rate, days and 365.
  5. 5Decide what each ledger can pay. Credit pays output tax only. Interest, late fee and penalty need cash.
  6. 6Apply the section 49(5) order to set off IGST, CGST and SGST credit against the liability.
  7. 7Apply the section 49(8) order if several dues are outstanding, then state the cash payable and the conclusion.

Quickest way: Five-line ledger and charge check

When to use it: Use when time is short and the question gives tax liability, credit balances and delay.

  1. Write liability and credit by head: IGST, CGST, SGST.
  2. Set off IGST credit first against IGST, then CGST, then SGST.
  3. Set off CGST and SGST credit against their own head, then any IGST left.
  4. Whatever remains is payable in cash, along with interest and late fee.
  5. Compute late fee (₹100 a day, cap) and interest (tax × rate × days ÷ 365) separately, then add.

Common mistakes in Returns and Payment of Tax

  • Using ITC to pay interest or late fee.

    Students think the credit ledger is a general pool.

    Fix: Remember section 49(4): credit pays output tax only. Interest, penalty and fee come from the cash ledger.

  • Using CGST credit to pay SGST, or SGST credit to pay CGST.

    They forget the cross-use bar in section 49(5)(e) and (f).

    Fix: Write the allowed paths first. CGST and SGST credit each pay their own tax or IGST, never each other.

  • Charging interest on the late fee or on the whole tax.

    They treat interest as a charge on every amount due.

    Fix: Interest applies to tax not paid in time. For delayed returns, the section 50 proviso limits interest to the portion paid by debiting the cash ledger, so credit-paid tax is not charged.

  • Applying the ₹5,000 cap to the annual return.

    Both late fees are ₹100 a day, so the caps get mixed.

    Fix: Section 47(1) caps at ₹5,000. Section 47(2) for the annual return caps at 0.25% of turnover in the State or Union territory.

  • Paying a later dues first for convenience.

    They ignore the order in section 49(8).

    Fix: Discharge earlier-period self-assessed dues first, then current-period dues, then other amounts such as demands under section 73, 74 or 74A.

Worked examples

Example 1

Ravi Traders, Pune, files its GSTR-3B 12 days late. Its tax paid wholly in cash is ₹2,00,000. Assume interest at 18% a year and a late fee of ₹100 per day under section 47(1) (no reduced fee applies). Compute interest and late fee.

Show the solution
  1. Late fee = ₹100 × 12 = ₹1,200, which is below the ₹5,000 cap.
  2. Interest applies on tax paid by debiting the cash ledger: ₹2,00,000.
  3. Interest = 2,00,000 × 18% × 12 ÷ 365.
  4. = 36,000 × 12 ÷ 365 = 4,32,000 ÷ 365 = ₹1,183.56 (approx.).
  5. Total additional payment = 1,200 + 1,183.56 = ₹2,383.56.

Answer: Late fee ₹1,200; interest about ₹1,184; total about ₹2,384. Both are paid from the electronic cash ledger.

Example 2

Mehta Industries, a registered person in Gujarat, has output liability of IGST ₹80,000, CGST ₹50,000 and SGST ₹50,000. Its credit ledger holds IGST ₹1,00,000, CGST ₹20,000 and SGST ₹60,000. Show the set-off and the cash payable, ignoring interest.

Show the solution
  1. Use IGST credit first against IGST: 80,000 set off. IGST credit left = ₹20,000.
  2. IGST liability is now nil. Use the remaining IGST credit against CGST: 20,000 set off. CGST liability left = ₹30,000.
  3. Use CGST credit of ₹20,000 against the remaining CGST of ₹30,000. CGST liability left = ₹10,000, CGST credit nil.
  4. Use SGST credit against SGST liability: 50,000 set off. SGST credit left = ₹10,000, SGST liability nil.
  5. The ₹10,000 SGST credit left cannot pay CGST under section 49(5)(f), and the IGST liability is already nil.
  6. Remaining CGST liability ₹10,000 must be paid in cash.

Answer: Cash payable is ₹10,000 (CGST). Closing credit balance is SGST ₹10,000, to be carried forward.

Exam tips

  • Quote section 49(4), (5) and (8) by number, and state the rule in plain words before applying it to the facts.
  • Show the ledger set-off as a small head-wise working so the examiner can follow each step.
  • State your assumptions on rate of interest and due dates, since they are notified and may differ from the question.
  • Always separate late fee from interest, and mention which ledger pays each.
  • For non-filers, mention section 62: best judgment assessment, five-year limit, and withdrawal if a valid return is filed within 60 days.

Practice questions from Procedural Compliance under GST

Returns and Payment of Tax in other exams

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

Returns and Payment of Tax: frequently asked questions

Can input tax credit be used to pay GST interest and late fee?

No. Under section 49(4), the electronic credit ledger pays only output tax under the CGST Act or the IGST Act. Interest, penalty, fee and other amounts must be paid from the electronic cash ledger.

What is the maximum late fee under section 47?

For returns under sections 37, 39, 45 or 52, the late fee is ₹100 a day, capped at ₹5,000. For the annual return under section 44, it is ₹100 a day, capped at 0.25% of turnover in the State or Union territory. Reduced fees may apply by notification.

From when does interest on delayed GST payment run?

Interest under section 50 runs from the day after the day the tax was due. The rate is notified and cannot exceed 18% a year. You must pay it on your own, without any notice.

What happens if I do not file a return even after notice?

Under section 62, the proper officer may assess your tax to the best of judgment on available material. If you file a valid return within 60 days of service of the order, the order is deemed withdrawn, though interest and late fee still apply.