Interest Calculator In GSTR-3B Explained H1

What is an Interest Calculator In GSTR 3-B Functionality?

The IT infrastructure of the indirect tax system has undergone several changes, mainly due to the implementation of the GST Network (GSTN). One of the significant modifications made is the addition of an interest calculator for GST, which allows taxpayers to calculate interest on late tax payments.

This new functionality will automatically calculate the interest due on late tax payments based on the data submitted in GSTR-3B for a specific tax period. The interest will be charged on the net production tax amount that remains unpaid or on the amount of tax paid by debit to the electronic cash ledger.

Taxpayers can confirm and discharge their interest liability as per the legislation. The interest amount for late payments will be reflected in GSTR-3B for the subsequent period.

Changes on GST Portal in Interest Calculation

Interest will be calculated only on the taxes paid by debiting the electronic cash ledger for supplies made during the current tax period. However, interest will be calculated on the entire liability for any prior tax liabilities reported in GSTR-3B for a specific period. To ensure the proper discharge of GST liabilities, the GST portal has implemented the following adjustments:

• Introduction Off Tax Liability Breakup:
• Taxpayers can now use this feature to provide a tax period-wise breakdown of the net GST liability paid. To provide this breakdown of payments made towards GST liability in Form GSTR-3B, taxpayers must select the new “Tax Liability Breakup, As Applicable” button.
• This button will become available after the liability has been paid. It enables taxpayers to allocate the overall liability towards the appropriate tax periods if the GST due for a specific tax period includes liabilities from prior tax periods.
• Taxpayers must use this feature to disclose the breakdown of their tax liabilities by period, as failing to do so can result in incorrect interest calculations. Interest will be calculated on the due amount if the tax liability is for the current period.
• Interest Calculation:
• With the new GST interest calculator, interest will be automatically calculated and presented in the return. Previously, taxpayers had to enter self-assessed interest in GSTR-3B of the next period.
• Interest will be calculated for each tax month based on the breakdown of the tax burden reported in the previous return. The following gst interest calculation formula will be used to calculate interest on overdue tax obligations for each period:

Interest Liability = Tax liability × (Number of days from the due date till the actual date of filing/Number of days in a year) × Interest rate.

The taxpayer can verify the auto-computed interest and the total interest. The taxpayer can modify the interest calculated before releasing the obligation if necessary. However, the system will display a warning notice if the interest amount is edited lower. Despite this warning, the taxpayer will be allowed to file the return.

• The GST interest calculator tool won’t affect taxpayers who haven’t paid any back taxes in the past periods.

Also Get Familiar With – Reverse Charge Mechanism in GST

Conclusion

The GST Interest Calculator in GSTR-3B is a critical tool for taxpayers to ensure compliance with GST regulations and avoid penalties or interest charges. It accurately calculates the interest liability, which is essential to prevent discrepancies in tax payments. Taxpayers should utilise this tool and stay up-to-date with the latest interest rates and guidelines to avoid non-compliance issues. Timely and proper filing of returns can help businesses maintain their credibility and reputation in the market.