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CA Intermediate · Taxation · Returns

Rahul Pvt Ltd, Chennai, a regular taxpayer, filed GSTR-3B for a month showing output tax of ₹6,00,000 (all CGST, SGST, and IGST combined) with ITC utilised of ₹4,20,000 and the balance paid in cash on 10 days after the due date. Assume interest rate of 18% per annum, and no late fee computation required. The cash paid was ₹1,80,000. Interest is payable on how much, and what is the amount (rounded to nearest rupee, 365-day year)?

Interest is payable on the net cash tax liability of ₹1,80,000, not the gross output tax. At 18% for 10 days, the interest is 1,80,000 × 18% × 10/365, which is about ₹888, because the ITC-paid portion does not attract interest.

  1. A₹1,80,000 × 18% × 10/365 = ₹888Correct
  2. B₹6,00,000 × 18% × 10/365 = ₹2,959
  3. C₹4,20,000 × 18% × 10/365 = ₹2,071
  4. DNo interest, as the ITC was available

Explanation

Interest is charged on the tax paid late, computed on the net cash liability, not on the part discharged by available ITC. Net cash liability is ₹1,80,000. Interest = 1,80,000 × 0.18 × 10/365 = ₹887.67, about ₹888. Using the gross ₹6,00,000 wrongly ignores that ITC was properly utilised.

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