A worked example: ₹1 lakh tax, 30 days delayed
₹1,00,000 in GST paid 30 days late, at the standard 18% per annum rate, accrues ₹1,479.45 in interest — a total payable of ₹1,01,479.45.
The formula: tax × 18% × days ÷ 365
Interest = tax amount × annual rate ÷ 100 × days delayed ÷ 365: ₹1,00,000 × 18 ÷ 100 × 30 ÷ 365 = ₹1,479.45. The rate is annual, so it's prorated down to however many days the payment was actually late.
Scaling up: ₹5 lakh tax, 60 days delayed
A larger ₹5,00,000 tax amount delayed for twice as long, 60 days, accrues ₹14,794.52 in interest — both a bigger base amount and a longer delay compound the cost, roughly 10 times the first example's interest for 5 times the tax and 2 times the days.
Why 18% is the standard rate — but not the only one
Section 50 of the CGST Act sets 18% per annum as the standard rate for delayed tax payment. A higher 24% per annum rate applies specifically to cases involving excess Input Tax Credit claims or an undue reduction in output tax liability — a different, more punitive scenario than simply paying the correctly-assessed tax late.