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CA Intermediate · Taxation · Payment of Tax

Kaveri Industries, a regular taxpayer, has a net GST liability for a tax period but did not pay tax by the due date. It paid the tax of Rs 2,00,000 (all net cash liability after ITC set-off) 40 days late. Interest is at 18% per annum under section 50 of the CGST Act. Assume the tax was paid in cash and no part of the tax was paid through ITC wrongly. What is the total interest payable, using 365 days in a year (rounded to nearest rupee)?

Interest is Rs 3,945. Delayed payment of tax attracts interest at 18% per annum on the tax unpaid, computed for the days of delay. Rs 2,00,000 x 18% x 40/365 gives about Rs 3,945, and the lower 12% rate does not apply to this default.

  1. ARs 3,945Correct
  2. BRs 3,288
  3. CRs 4,932
  4. DRs 1,973

Explanation

Interest = 2,00,000 x 18% x 40/365 = 36,000 x 40/365 = 1,440,000/365 = Rs 3,945.2, so Rs 3,945. Rs 3,288 uses 12% per annum incorrectly (the rate for refunds and other cases, not for delayed payment of tax). Rs 4,932 uses 50 days.

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