Overview of the Interest Calculator in GSTR-3B on the GST portal


Date: 31 Jan 2023

Interest Calculator In GSTR-3B Explained

The GST regulation requires that taxpayers pay interest on any overdue GST liability payments. The taxpayer is accountable for figuring out interest on overdue payments. One must correctly calculate interest in order to ensure the proper discharge of interest liabilities as required by law. The GSTR-3B now has an interest calculator feature to simplify taxpayers' lives.

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

The IT infrastructure for the indirect tax system has undergone numerous changes as a result of the GST Network (GSTN). The addition of the interest calculator is one of the modifications. In order to calculate interest for late tax payments, taxpayers can use the interest calculator.

The data submitted in GSTR-3B for a particular tax period will be used to automatically calculate the interest due on late tax payments under this new functionality. The late payment of net production tax due, or the amount of tax paid by way of debit to the electronic cash ledger, shall be the subject of the interest. According to the legislation, taxpayers can confirm and discharge the proper interest liability. The GSTR-3B for the following period will reflect the interest for late payments.

Background To Auto Population Of System Computed Interest

According to Section 50 of the CGST Act, 2017, interest will be assessed on any GST liability paid late for a specific period. After subtracting applicable input tax credits from the total output tax, interest is assessed on the net GST liability. This implies that the amount paid in cash to satisfy the GST due will be subject to interest calculations.

The day after the filing deadline to the day of tax payment is when interest is calculated. According to the Act, the interest rate must not be more than 18% p.a. and must be determined by the Government. The current interest rate on late tax payments has been announced to be 18% p.a.

Taxpayers had to determine their interest liability on delayed tax payments and discharge their liabilities before implementing this technology. This was challenging because taxpayers were unable to calculate their actual interest liabilities. Because the interest was only calculated on a self-assessment basis, there were instances where certain taxpayers would avoid paying this interest.

Changes On GST Portal In Interest Calculation  

Interest will only be computed on taxes paid by debiting the electronic cash ledger for supply made during the current tax period. However, interest will be calculated for the whole liability for any prior tax liabilities reported in GSTR-3B for a specific period. To ensure that GST liabilities are properly discharged, the following adjustments have been implemented on the GST portal:

1) Introduction Off Tax Liability Breakup:

  • The taxpayer can provide a tax period-by-tax period breakdown of the net GST liability paid using this capability. The taxpayer can now provide this breakdown of payments made toward GST liability in Form GSTR-3B by selecting the new "Tax Liability Breakup, As Applicable" button.

  •  After the liability has been paid, this button will become available. This function allows the taxpayer to divide the overall liability toward the appropriate tax periods in the event that the GST due for a given tax period contains liabilities from prior tax periods.

  • Taxpayers must make use of this feature since failing to disclose the breakdown of their tax liabilities by period would result in incorrect interest calculations. If the tax liability is for the current period, interest will be calculated on the entire amount due. 

           2) Interest Calculation:

  • The new interest calculator will automatically calculate the interest and present it in return; formerly, self-assessed interest had to be entered in GSTR-3B of the next period.

  • Based on the breakdown of the tax burden stated in the preceding return, interest is calculated for each tax month.

  • For each period, interest on overdue tax obligations is computed using the formula below:

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 auto-computed interest and total interest can both be confirmed by the taxpayer. The taxpayer has the option to change the interest that was calculated before releasing the obligation. However, the system will display a warning notice when the interest numbers are edited lower. The taxpayer will be permitted to continue filing the return despite this.

  • Taxpayers who haven't paid any back taxes in the past periods won't be affected by the interest calculator tool.

Example Of How Interest Calculation In GSTR 3-B Works

  • In form GSTR-3B, the taxpayer submits all output tax liabilities, including those from previous quarters, as well as any qualifying input tax credits. The taxpayer has the option to settle their GST obligations. The "Tax Liability Breakup, As Applicable" button will turn on once the taxpayer has paid the liability.

  • Clicking this button will allow taxpayers to declare the breakdown of their paid GST liability by period. The taxpayers will report the breakup. Once the split has been submitted, the sum of all the periods must match the total GST liability paid in that return.

  • After making the necessary declarations and pressing the save button, the taxpayer can move on to file the return.

  • The late fines due and interest on overdue tax payments will automatically reflect in return for the following period after the return has been filed.

  • The interest shall be determined in accordance with CGST Act, 2017, section 50. Interest is automatically computed and displayed in Table 5.1 of GSTR-3B, Interest and late charge for the prior tax period. The entire amount of interest calculated for each tax period will be reflected in the corresponding cells.

  • The taxpayer may still proceed and submit the return despite the warning.