Can You Pay GST Dues in Instalments? Know the Eligibility and Conditions

The Goods and Services Tax (GST) system in India aims to streamline indirect taxation. At the same time, it provides mechanisms to help taxpayers who face financial stress. One such relief is the option to pay certain GST dues in installments under Section 80 of the Central Goods and Services Tax (CGST) Act, 2017.

This facility allows eligible taxpayers to spread their liability over monthly installments, making compliance easier while keeping businesses financially stable.

Introduction to GST Instalments under Section 80

Section 80 of the CGST Act, 2017, empowers the Commissioner to permit a taxpayer to pay outstanding dues in monthly installments. The section clearly states that the Commissioner may allow payment of any amount due under the Act, except the amount declared as self-assessed in a return, in installments not exceeding twenty-four months. These instalments are subject to interest and specific conditions.

“80. Payment of tax and other amounts in installments.

On an application filed by a taxable person, the Commissioner may, for reasons to be recorded in writing, extend the time for payment or allow payment of any amount due under this Act, other than the amount due as per the liability self-assessed in any return, by such person in monthly instalments not exceeding twenty four, subject to payment of interest under section 50 and subject to such conditions and limitations as may be prescribed:

Provided that where there is default in payment of any one instalment on its due date, the whole outstanding balance payable on such date shall become due and payable forthwith and shall, without any further notice being served on the person, be liable for recovery.”

The objective is to provide breathing space to taxpayers who are otherwise compliant but face difficulty in making lump sum payments. This ensures that businesses can continue operating while meeting their legal tax obligations.

Who Can Apply for GST Instalments?

The eligibility rules for instalments are set out in Rule 158 of the CGST Rules, 2017. Not everyone can use this facility. The key restrictions are:

• Taxpayers who have already defaulted in paying earlier GST dues and against whom recovery proceedings are active cannot apply.
• Taxpayers who were denied the installment facility in the preceding financial year are ineligible.
• Instalments cannot be granted if the outstanding amount is less than Rs. 25,000.

Thus, the benefit is reserved for compliant taxpayers who file returns correctly but struggle to pay assessed dues in one go. Courts have often emphasised that Section 80 is a benefit for genuine cases and not for those who deliberately avoid paying their admitted tax.

What Types of Dues Can Be Paid in Instalments?

The instalment facility does not cover all kinds of GST liabilities.

Covered dues include:

• Tax assessed through adjudication orders
• Interest on unpaid tax (other than self-assessed)
• Penalties imposed by the tax authority
• Any demand arising from post-assessment or appeal orders

Excluded dues include:

• Tax liability admitted in returns but not paid
• Interest arising from delay in paying self-assessed tax

The exclusion of self-assessed tax is crucial. For example, if a taxpayer files a GSTR-3B return and declares tax payable but does not pay it, the amount cannot be covered under Section 80. High Courts, such as in the K.I. International case, have upheld this position.

How to Apply for GST Instalments

Applications for instalments are filed online using Form GST DRC-20. The steps are:

1. Log in to the GST portal, go to “My Applications,” and choose “Application for Deferred Payment or Payment in Instalments.”
2. Fill in details such as Demand ID, amount due, reasons for hardship, and proposed schedule.
3. Upload supporting documents like financial statements to demonstrate genuine inability to pay in lump sum.
4. Submit the form after verification using Digital Signature Certificate or Electronic Verification Code.
5. An Application Reference Number is generated, and confirmation is sent via email and SMS.

The Commissioner reviews the application and issues an order in Form GST DRC-21 if approved. This order specifies the number of installments, due dates, and the interest payable.

Number of Instalments and Interest Rate

• The maximum permitted is 24 monthly installments, meaning the liability can be spread across two years.
• Interest at 18 percent per annum applies throughout the instalment period under Section 50 of the CGST Act.
• The interest formula is: Interest = (Outstanding Tax Amount × 18 × Number of Days) ÷ 365.

For example, if Rs. 50,000 is outstanding for 30 days, the interest works out to about Rs. 739.

What Happens If You Miss an Instalment?

The law is strict regarding default. If a taxpayer misses even a single instalment, the facility is automatically cancelled. The entire remaining balance becomes payable immediately, without any further notice, and recovery proceedings may begin.

For instance, if a taxpayer owing Rs. 12,000 is permitted to pay in 12 installments and defaults on the third payment, the balance outstanding from that date becomes due in full. This provision ensures discipline and prevents misuse.

Can You Reapply After Default?

The rules are silent on reapplication after default. However, Rule 158 restricts taxpayers who were denied installment facility in the previous financial year from applying again. Courts have occasionally shown flexibility, allowing taxpayers to seek relief if they prove genuine hardship and non-wilful default. Still, the general approach is cautious, and taxpayers should avoid relying on a second chance.

Best Practices to Avoid Default

1. Financial planning – Keep accurate cash flow records and earmark funds for instalments.
2. Compliance management
   – Use reminders, maintain calendars, and reconcile GST returns regularly.
3. Communication with authorities – If facing difficulty, inform the jurisdictional officer in advance.
4. Technology use – Employ GST filing software and automated reminders for due dates.

These steps help reduce the risk of missing instalments and protect the taxpayer’s eligibility for relief.

Judicial Guidance on Instalments

Several courts have clarified the scope of Section 80:

• K.I. International v. Commissioner (Madras High Court) – Self-assessed dues declared in returns are excluded from instalment benefit.
• P.K. Ores Private Limited v. Commissioner (Orissa High Court) – Instalments cannot be granted for interest on delayed self-assessed tax.
• Best Recharge v. Deputy Commissioner (Madras High Court) – Allowed taxpayers to approach the Commissioner for installments on interest related to disputed credits.

Frequently Asked Questions

1: Can I apply if my dues are less than Rs. 25,000? No. The minimum threshold is Rs. 25,000.

2: Can installments cover self-assessed tax dues? No. Section 80 excludes these amounts.

3: How many installments are allowed? A maximum of 24 monthly installments.

4: What is the interest rate? Eighteen percent per annum.

5: What if I default on one instalment? The entire balance becomes immediately payable, and recovery begins.

6: Can I change the instalment schedule later? No. Any change requires a fresh application and approval.

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