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CA Intermediate · Taxation · Payment of Tax

Ramesh Pvt Ltd failed to pay its GST of Rs 2,00,000 for a month by the due date and paid it 73 days late. Of this tax, Rs 50,000 was paid through the electronic credit ledger and the rest in cash. Assuming interest rate of 18% per annum under section 50, and that the interest is charged on the portion paid in cash only (the net cash tax liability), what is the interest payable (rounded to the nearest rupee)?

Interest is Rs 5,400. Under section 50, 18% interest applies only to the portion of tax paid in cash, Rs 1,50,000, because the Rs 50,000 credit was available. For 73 days, that is 1,50,000 x 18% x 73/365.

  1. ARs 7,200Correct
  2. BRs 9,600
  3. CRs 5,400
  4. DRs 3,600

Explanation

Interest under section 50 at 18% applies on the tax payable through the electronic cash ledger, i.e. net of ITC available in the credit ledger, which is Rs 1,50,000. Interest = 1,50,000 x 18% x 73/365 = 1,50,000 x 0.18 x 0.2 = Rs 5,400. Check: 73/365 = 0.2, and 27,000 x 0.2 = 5,400. So the correct figure is Rs 5,400, not Rs 7,200, which wrongly uses a different base.

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