Section 50 charges interest when tax reaches the Government late, and when credit wrongly taken has actually been used. Interest is compensation for the delay, so it runs only on tax the Government was kept out of — for a late return, only on the part paid in cash, and for wrong credit, only once it was utilised.
Key points
- Under section 50(1) of the CGST Act, 2017 a person who fails to pay tax within the prescribed period pays interest, on its own, at the notified rate — 18% a year — for the period the tax remains unpaid, calculated from the day after it was due (section 50(2)).
- Where a return is filed late, interest is charged only on the portion of tax paid in cash, not on tax paid from the credit ledger — unless the return is filed after proceedings under section 73, 74 or 74A have begun (proviso, effective from 01.07.2017).
- Interest on input tax credit is payable only where it is wrongly availed and utilised, at 18% (section 50(3), substituted from 01.07.2017); credit is "utilised" when the credit ledger balance falls below the wrongly availed amount (Rule 88B).
- Interest is compensatory and follows the tax actually withheld (Pratibha Processors v Union of India, SC 1996).
- The Madras High Court held in Eicher Motors (2024) that no interest is due where the tax was in the cash ledger by the due date, though the return was filed late.
HistoryGross or net interest (2017–2021)— Interest was demanded on gross tax until the 2021 amendment, made retrospective, settled it on net cash.
As enacted, sub-section (1) charged interest on "the tax or any part thereof" unpaid, and departments demanded interest on the gross liability where returns were filed late, even when credit was available throughout. The Telangana High Court upheld that reading in Megha Engineering and Infrastructures v Commissioner of Central Tax (18.04.2019). The GST Council then recommended interest on the net cash liability. The Finance (No. 2) Act, 2019 inserted a proviso to that effect, brought into force only prospectively from 01.09.2020 (Notification 63/2020-Central Tax), with an assurance that past recoveries would not be pursued. The Finance Act, 2021 then substituted the proviso with effect from 01.07.2017 (section 112, brought into force on 01.06.2021 by Notification 16/2021-Central Tax).
Sub-section (3) originally charged up to 24% where credit was "wrongly availed or utilised". The Finance Act, 2022 substituted it from 01.07.2017 to apply only where credit was wrongly availed and utilised, and Notification 9/2022-Central Tax fixed the rate at 18%, also from 01.07.2017.
The provisions
50(1)–(2)Interest on tax paid late
Statutory text
(1) Every person who is liable to pay tax in accordance with the provisions of this Act or the rules made thereunder, but fails to pay the tax or any part thereof to the Government within the period prescribed, shall for the period for which the tax or any part thereof remains unpaid, pay, on his own, interest at such rate, not exceeding eighteen per cent., as may be notified by the Government on the recommendations of the Council:
1[Provided that the interest on tax payable in respect of supplies made during a tax period and declared in the return for the said period furnished after the due date in accordance with the provisions of section 39, except where such return is furnished after commencement of any proceedings under section 73 or section 74 3[or section 74A] in respect of the said period, shall be levied on that portion of the tax that is paid by debiting the electronic cash ledger.]
(2) The interest under sub-section (1) shall be calculated, in such manner as may be prescribed, from the day succeeding the day on which such tax was due to be paid.
*Enforced w.e.f. 1st July, 2017.
1. Substituted (w.e.f. 1st July, 2017) by s. 112 of The Finance Act, 2021 (No. 13 of 2021) dated 28th March, 2021 for
"[Provided that the interest on tax payable in respect of supplies made during a tax period and declared in the return for the said period furnished after the due date in accordance with the provisions of section 39, except where such return is furnished after commencement of any proceedings under section 73 or section 74 in respect of the said period, shall be levied on that portion of the tax that is paid by debiting the electronic cash ledger.]"
Brought into force on 1st June, 2021 vide Notification No. 16/2021-Central Tax dated 1st June, 2021.
3. Inserted by section 126 of The Finance Act (No. 2) Act, 2024 No. 15 of 2024 dated 16.08.2024.
- Notification 13/2017-Central Tax — rates (as amended by Notification 9/2022-Central Tax)
- Rule 88B, CGST Rules — calculation of interest
Cases on this provision
Pratibha Processors v Union of India
(1996) 11 SCC 101 · 11.10.1996 · Supreme Court, 2 Judges (S.P. Bharucha, K.S. Paripoornan JJ.)
- Facts
- Importers warehoused goods beyond the permitted period and later cleared them under advance licences, under an exemption that made the duty nil. Customs demanded interest under section 61(2) of the Customs Act at 18% on the duty notionally assessed for the period of extended warehousing. The Bombay High Court upheld the demand.
- Held
- Appeals allowed. Interest is compensatory in character, imposed on an assessee who has withheld tax when it was due; it is geared to the actual amount of tax withheld and the period of delay. Where the duty payable is nil because of an exemption, there is nothing on which interest can be charged.
- Here
- The principle explains the proviso to sub-section (1) and sub-section (3): interest is due only on tax the Government was actually kept out of — the cash portion of a late return, or credit wrongly taken and actually used.
Eicher Motors Ltd v Superintendent of GST and Central Excise
W.P. Nos. 16866 & 22013 of 2023 · 23.01.2024 · Madras High Court, Single Judge (Krishnan Ramasamy J.)
- Facts
- For July–December 2017 the company deposited about Rs. 527 crore in its electronic cash ledger before each due date, but filed its GSTR-3B returns late, in January 2018, because its transitional credit claim was held up. The department demanded about Rs. 23.76 crore of interest for the late returns.
- Held
- Interest under section 50(1) is for failure to pay tax within the prescribed period. Under the Explanation to section 49, a deposit is made when the amount is credited to the Government's account, so the tax had been paid on time; the delay in filing the return did not make the payment late. A proviso cannot enlarge the main provision. The demand was quashed.
- Here
- A deposit in the cash ledger by the due date can answer a demand for interest for a late return. The department's view — that tax is paid only when the ledger is debited on filing — has support elsewhere (the Court distinguished the Jharkhand High Court's decision in RSB Transmissions), so the point is not settled beyond Madras.
50(3)Interest on credit wrongly availed and utilised
Statutory text
2[(3) Where the input tax credit has been wrongly availed and utilised, the registered person shall pay interest on such input tax credit wrongly availed and utilised, at such rate not exceeding twenty-four per cent. as may be notified by the Government, on the recommendations of the Council, and the interest shall be calculated, in such manner as may be prescribed]
2. Substituted (w.e.f. 1st July, 2017) by s. 111 of The Finance Act 2022 (No. 06 of 2022) - brought into force w.e.f 05-07-2022 vide Notification No. 9/2022-C.T, dated 05-07-2022 .
What it means
Interest is due only where credit is both wrongly availed and utilised. Under Rule 88B(3), credit is treated as utilised when, and to the extent that, the balance in the credit ledger falls below the wrongly availed amount; interest runs from that date until the credit is reversed or paid. Credit availed wrongly but kept unused in the ledger attracts reversal, but not interest. Reversal of credit under section 41(2) and Rule 37A carries interest on the same basis.
Statutory text as published on the CBIC tax information portal, as on 03.10.2026; the numbered notes record each amendment. Official source
Common questions
- What is the interest rate on late payment of GST?
- 18% a year under section 50(1) of the CGST Act, calculated from the day after the due date. For a late return, interest is charged only on the portion paid in cash.
- Is interest payable on wrongly availed input tax credit that was not used?
- No. Since the 2022 amendment, effective from 01.07.2017, section 50(3) charges interest (at 18%) only where credit is wrongly availed and utilised.
- Is interest payable if tax was deposited in the cash ledger on time but the return was filed late?
- The Madras High Court held in Eicher Motors (2024) that it is not, because the tax was paid when credited to the Government's account. The department takes a different view, and the point is not settled nationally.
Commentary and case notes checked against the judgments and CBIC sources on 04.10.2026.
What it means
The rate is notified at 18% (Notification 13/2017-Central Tax). Interest runs from the day after the due date until payment, and the taxpayer must pay it "on his own" — it does not depend on an order. Where it is disputed and not paid, it is recovered through proceedings under section 73, 74 or 74A, or section 75(12) where it relates to self-assessed tax.
Under the proviso, a return filed after the due date attracts interest only on tax paid by debiting the electronic cash ledger, since credit already in the ledger was not withheld from the Government. The benefit is lost if the return is filed after proceedings under section 73, 74 or 74A have been initiated for the period. Rule 88B prescribes the calculation.