Overdue fees generally do not attract GST if they are treated as penalty interest or a "financial supply" (e.g., in Australia). However, if the fee is considered part of the payment for the original goods or services, it is treated as a taxable supply and subject to GST.
1. Late payment fees are part of the main supply (like electricity bills, telecom services, or property transactions). 2. GST applies to these charges at the same rate as the main product/service.
Do not charge the GST/HST on late-payment surcharges. GST/HST is payable only on the original invoiced amount.
This will depend on the facts of each case. Where the late payment penalty is consideration for a financial supply (for example, a supply of an interest in a credit arrangement), there is no need for the supplier to account for GST for that supply.
Common BAS Excluded items include wages, super, bank transfers, owner drawings, income tax payments, fines, donations, and certain government charges. Use “BAS Excluded” in Xero for genuinely out-of-scope items, and use GST or GST-free codes for reportable sales and purchases.
The facility of accepting late payment within interest/ late fee, fine or penalty is a facility granted/ provided by the supplier; The same is taxable under GST and will be assessed at the same rates as that of the principal supply.
These include bank transfers between accounts, stamp duty, depreciation and salary/wages. These are purchases/sales that have a 0% GST rate. Examples include, purchasing items from overseas (exports); purchasing items from within Australia that are not subject to GST, eg. fresh food, some education.
GST Late Fee Structure in India
This fee motivates prompt compliance. Here are the key elements of the GST late fee structure: Daily Late Fee: A late fee of ₹50 per day is paid on Central GST (CGST) and State GST (SGST). The cumulative amount of the late fee is ₹100/day of CGST and SGST combined.
Late payment charges
There is no supply of goods or services taking place when you make an extra charge to your customers because they have paid late. The charge is classed as a penalty that is outside the scope of VAT.
GST – Cash or Accrual
Those on an accrual basis will pay GST on their outstanding invoices when they lodge their BAS for the period when the invoice was raised. Those on a cash basis will pay the GST when they lodge their BAS for the period that they get paid for the invoice.
The GST rate on professional fees is 18%. It varies based on the kind of services which range from 5% to 18%.
Example: Healthcare services, educational services, and public utility services (e.g., water supply) are exempt from GST. This exemption is unconditional, meaning the supply is fully exempt from GST without any terms or conditions attached.
Late payment and finance charges (monthly interest) are exempt from GST. Are cash advance fees subject to GST? No, they are exempt from GST.
If you want to charge late payment fees, you certainly can. However, these need to be clearly stated on the invoice so the customer is aware of them and encouraged to pay on time. Your late fees should also be fair.
Notification No. 08/2025 waives the late fee under section 47 of the Central Goods and Services Tax (CGST) Act for the annual return (FORM GSTR-9) for the financial years 2017-18 to 2022-23.
When a business charges businesses by invoice, the date of recognition is the date the invoice was issued, not the due date (or the payment date). This means that it's quite common for companies to have to pay VAT on unpaid invoices. It's particularly likely for companies with higher-value sales.
Standard late fee for invoices
While there is yet to be a universal answer regarding an appropriate rate, in most cases and across most industries, a late fee rate between 1% and 2% is often considered the standard.
Agricultural products, tuition fees, lending operations, real estate, books, transportation and other necessities are typically VAT-exempt transactions.
The invoice payment terms should detail when late fees are due and the rates applied. A simple example late fee phrase could be: “Invoice payment is due within 30 days. Please be advised that we will charge 1% interest per month on late invoices.”
GST Late fees: - As per GST Law, Late Fees is to be levied in case of delay in filing of GST Returns. Late Fees cannot be construed as a "Penalty" or "Offence." The same is compensatory in nature and not penal. Therefore, it is allowed under Income-tax Act.
An invoice late payment fee typically appears as either a flat rate charge (such as $25 or $50) or a percentage of the outstanding balance (commonly 1-2% per month).
Common Examples of GST Exempt Transactions:
Financial services – Most banking services, interest payments, and insurance premiums. Residential rent – Rental income from residential properties. Donated goods and services – Items or services that are given away without payment.
GST Invoice Format and Mandatory Details It Must Include
The invoice number and the date of the invoice. Name, address, and GSTIN of the supplier. Name, address, and GSTIN of the recipient (if registered)
Key items exempted from GST:
Prepared foods and snacks: Vegetable trays, pre-made meals, salads, sandwiches, chips, candy, granola bars, etc. Dining: Restaurant meals (dine-in, takeout, or delivery). Beverages: Beer, wine, cider, and sake.