In India, the Goods and Services Tax (GST) is a comprehensive tax levied on the supply of goods and services. The GST law includes several provisions for interest, one of which is 88B. This article will explain what 88B is and how it is used in the GST system.
88B is a provision in the GST law which provides for the payment of interest in certain circumstances. It states that when the tax liability of a taxpayer is not paid within the due date, the taxpayer will be liable to pay interest at the rate of 18% per annum from the due date until the date of payment. The rate of interest is applicable to all GST liabilities, except where the delay is due to fraud or wilful default.
Under 88B, the interest is calculated on the net tax liability of the taxpayer. This means that it is calculated on the amount of tax payable after deducting the input tax credit (ITC) which the taxpayer is eligible to claim. In cases where the taxpayer has not claimed the ITC, the interest should be calculated on the gross tax liability.
The interest is calculated from the date on which the tax was due to be paid, until the date of payment. If the payment is made after the due date but before the date of filing the GST return, the interest shall be calculated from the due date up to the date of filing the return.
Under Input Tax System, taxpayers can claim credit for the GST paid on their inputs (i.e., raw materials, capital goods, etc.) and use it to offset the GST liability on their output (i.e., finished goods, services, etc.). To claim ITC, taxpayers need to file Form GST TRAN-1, which is also known as the “Claim for Input Tax Credit.”
However, there are certain situations where taxpayers may be unable to pay GST within the due date. In such cases, Section 88B of the GST Act provides for the provisions of interest on delayed payment of GST. According to this section, if a taxpayer fails to pay the GST within the due date, they shall be liable to pay interest on the outstanding amount. The interest rate is currently 18% per annum.
The interest on delayed GST payment is calculated from the date on which the tax was due until the date on which the tax is paid. For example, if the due date for payment of GST is the 20th of a month and the taxpayer pays it on the 25th of the same month, they will be liable to pay interest for five days. It is important to note that the interest will be calculated on the net tax liability, which is the GST liability after deducting the ITC.
In conclusion, the GST system in India has several important provisions that taxpayers need to be aware of, including the input tax credit system and the provisions for interest on delayed payment of GST. Taxpayers who are unable to pay the GST within the due date should be aware of the interest rate and the calculation of interest as per section 88B of the GST Act. To avoid any penalties or fines, it is recommended that taxpayers pay the GST within the due date and make use of the input tax credit system to offset their GST liability.
In some cases, the taxpayer may be liable to pay interest even if the tax liability is not paid within the due date. This is known as ‘late fee’ and is applicable when the taxpayer does not file the GST returns within the due date. The late fee is charged at a rate of 0.25% per day, and is calculated from the due date of filing the GST return, up to the date of filing.
In summary, 88B is a provision in the GST law which provides for the payment of interest in certain circumstances. It applies when the tax liability of a taxpayer is not paid within the due date, and is calculated on the net tax liability of the taxpayer. In some cases, the taxpayer may be liable to pay a late fee if the GST returns are not filed within the due date. Understanding 88B is important for businesses to ensure that they comply with the GST law and avoid any penalties or interest.