The government is looking to levy differential rates of interest on taxpayers for delayed payment of Goods and Services Tax (GST). It is in planning to levy interest for the first three months at the rate of 18% and 24% afterward.
The government will begin to charge interest on the net GST amount and not on the gross amount which has been the case so far.
This move will help to pursue businesses to pay their taxes on time and to boost revenue collection.
As per the current GST law, the taxpayers are paying interest on the full amount without adjusting for the input tax credit (ITC) where the delayed payment of GST attracts a flat rate of 18% interest.
The proposal to levy a differential rate of interest has been referred to the Law Committee of the GST Council before it is considered by the Council.
The Law Committee was implemented in July 2017. It is an advisory body comprising tax officials representing the central and states government with the responsibility to oversee the indirect tax regime.
The officials said that the decision to charge interest on net GST amount has been taken already and the law has also been amended in accordance. A notification about the amendment could be released soon.
The GST Collection in August this year stood at about 98,202 Crore, which was lowered by 3.8% in comparison to the previous month. The August collection was the lowest monthly collection in the first five months of the current fiscal.