Goods and Services Tax (GST) is a tax that has been implemented in India to bring about a unified taxation system. Businesses in India are required to comply with the GST regulations, including the payment of GST liabilities on time. However, there may be situations where businesses may not be able to pay their GST liabilities on time, which can result in penalties and fines. In this article, we will discuss the penalty for delayed or non-payment of GST liability, the consequences of non-compliance, and the measures that businesses can take to avoid penalties. Understanding these aspects of GST compliance is crucial for businesses to maintain their financial health and avoid any legal issues.
According to GST laws, a late fee is an amount charged for the late filing of GST returns.
When a GST-registered business fails to file GST returns by the prescribed due dates, a prescribed late fee will be charged for each day of delay.
The late fee must be paid in cash, and the taxpayer is not permitted to use the Input Tax Credit (ITC) available in the electronic credit ledger to pay the late fee.
The late fee also applies to failing to file nil returns on time. For example, a late fee must be paid even if there are no sales or purchases and no GST liability to declare in GSTR-3B.
The late fee is calculated based on days past the due date. The GST return in GSTR-3B was filed on January 23, 2021, three days after the prescribed due date of January 20, 2021. Late fees will be assessed for three days and must be paid in cash.
However, the GST portal is currently set up to charge a late fee only on GSTR-3B, GSTR-4, GSTR-5, GSTR-5A, GSTR-6, GSTR-8, GSTR-7, and GSTR-9 returns.
It should be noted that the maximum late fees have been reduced beginning with June 2021 and the quarter ending June 2021.
According to the outcome of the 43rd GST Council meeting, the maximum late fee is reduced to the following amounts based on the type of return and turnover slab, as notified via CGST notifications 19/2021, 20/2021 dated 1st June 2021 for GSTR-3B and GSTR-1.
Furthermore, the late fee for delayed filing of GSTR-4 from FY 2021-22 has been rationalised via CGST notification 21/2021 dated June 1 2021. The maximum late fee will be Rs.500 per return for nil filing and Rs.2000 for non-nil filing.
According to CGST notification 22/2021 dated June 1 2021, the late fee chargeable for GSTR-7, i.e. TDS filing under GST, shall be a maximum of Rs. 2,000, while the late fee per day charged is reduced from Rs.200 to Rs.50 per act, per return.
According to the GST Acts, the following late fees must be paid for intrastate supplies under both the CGST and SGST Acts:
|Name of the Act||Late fees for every day of delay|
|Central Goods and Services Act, 2017||Rs 25|
|Respective State Goods and Services Act, 2017 (or) Union Territory Goods and Services Act, 2017||Rs 25|
|Total late fees to be paid for the day||Rs 50|
The law sets a maximum late fee of Rs 10,000 until May 20, 2021. This means that the maximum late fee the government can charge is Rs 5,000 for each return filed under each Act. However, as stated above, the maximum late fee has been reduced beginning with the June 2021 return period.
The Nil return filers must pay the below-mentioned late fee:
|Names of the Act||Late fees for everyday delay|
|CGST Act||Rs 10|
|SGST Act||Rs 10|
|Total late fees to be paid per day||Rs 20|
From the June 2021 return period onwards, the maximum late fee for GSTR-1 and GSTR-3B has been rationalised, as shown in the preceding section.
For example, suppose a taxpayer filed GSTR-3B for December 2020 on January 23, 2021, when the actual due date was January 20, 2021.
Late fees must be paid at Rs.150 (Rs. 50 per day for three days). The late fee under CGST would be Rs.75 and Rs.75 under SGST.
If the above return had a ‘Nil’ tax liability, late costs would be Rs. 60. (20 per day, three days). The late fee under CGST would be Rs.30, and Rs.30 under SGST.
* The original late fees under the CGST and SGST Acts were Rs.100 per day. Furthermore, under both the CGST Act and the SGST Act, the original late fine for Nil return filers was Rs.25 each day. However, the CBIC has announced reduced late fees to help businesses with difficulty filing their GST returns.
GST Annual Returns (GSTR-9) is a yearly return that businesses in India must file to provide a summary of their financial transactions for the year. It is crucial for businesses to file GSTR-9 accurately and on time to avoid penalties and maintain compliance with GST regulations.
|Name of the Act||Late fees for every day of delay|
|Central Goods and Services Act, 2017||Rs 100|
|Respective State Goods and Services Act, 2017 (or) Union Territory Goods and Services Act, 2017||Rs 100|
|Total Late fees to be paid||Rs 200|
The law has set a maximum late fee of 0.25% of the fiscal year’s turnover as the maximum.
The updated list of late-fee notifications provides information on the revised late fees for delayed GST return filings in India. Here is the updated list of late-fee notification.
|Applicable return period/s||Applicability of Late fee|
|June 2021 onwards for monthly filers and quarter-ended June 2021 onwards for QRMP taxpayers||Maximum late fee is reduced. For nil filers, it is fixed at Rs.500 per return. For the rest, it is fixed as per turnover slabs, explained in the above section.|
|Months March 2020 – June 2020 and Quarter ending 31st March 2020 and 30th June 2020||Waived off completely if filed before the specified dates of July-August 2020.|
|Months March 2020 – April 2020 and Quarter ending 31st March 2020||Waived off completely if filed before the specified dates of June-July 2020.|
|July 2017 – November 2019||Waived off completely if filed between the period from 19th December 2019 to 10th January 2020|
|July 2019||Waived off completely for taxpayers in certain districts of the flood-affected States and all districts of J&K|
|July 2017 – September 2018||Waived off completely|
|July 2017 onwards||Reduced Late fee|
Late fees and interest are significant components of the Goods and Services Tax (GST) payment and are incurred by businesses when GST returns are not submitted or filed on time.
The Goods and Services Tax (GST) is a crucial tax that has been implemented in India to unify the taxation system. One of the essential requirements of GST compliance is the timely payment of GST liabilities. Failure to pay the GST liability on time can result in penalties and fines, which can have significant financial implications for businesses. The penalty for delayed or non-payment of GST liability is charged at an interest rate of 18% per annum, calculated on the outstanding tax amount. The penalty is calculated from the due date of payment until the actual date of payment. Additionally, businesses may also face legal consequences for non-compliance, including prosecution, seizure of assets, and cancellation of GST registration.
In conclusion, timely payment of GST liabilities is essential for businesses to maintain compliance and avoid penalties. Non-payment or delayed payment of GST liability can result in a penalty of 18% per annum, which can have significant financial implications for businesses. Moreover, businesses may also face legal consequences, including prosecution and asset seizure. It is, therefore, crucial for businesses to keep track of their GST liabilities and ensure timely payment to avoid penalties and maintain their financial health. By adopting proactive measures and seeking professional assistance, businesses can ensure compliance with GST regulations and avoid any legal issues.