GST
Interest on reverse charge paid late
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Facts
Yes. RCM tax must be paid in cash by the return due date for the period. Paying it later attracts interest at 18 percent, even though ITC may be available after payment.
Provisions and law
- Sec 50(1), CGST Act 2017Interest is payable on tax paid late for the period of delay at the notified rate (18 percent a year); on a late return it is levied only on the portion paid in cash, except where proceedings under Sec 73, 74 or 74A have started.
- Sec 9(3), CGST Act 2017Tax on notified goods and services is paid by the recipient under reverse charge.
Analysis
If RCM of ₹9,000 on legal fees of January was paid in May, interest is for about 100 days: about ₹444. The ITC, once taken, depends on Sec 16(4) time limits. Track RCM monthly to avoid this.
Conclusion
- Identify RCM liabilities by period.
- Pay in cash in the return for that period.
- If late, compute interest from the due date.
- Claim ITC after payment within time limits.
A Savvy can do this for you
Interest on late tax payment, Sec 50
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