Facts checked on 27 October 2026. Published by MDG Services on 26 October 2026.
The rule in short
This page is for a petrol pump that gives diesel on credit to regular customers such as transporters, not for money lent to a friend.
You can claim interest with most confidence when the transporter agreed to it in writing before the first credit fill. Where nothing was agreed, a court decides whether to give interest and at what rate Interest Act 1978, s.3.
What to write before the first credit fill
- Rate: per month or per year.
- Start day: for example, the day after the due date.
- What it applies to: the unpaid amount of the overdue bill.
- How it is counted: simple interest, for the days late.
- How the transporter agreed: a signed credit form, or terms accepted before the first credit fill. Keep the signed copy or a written "Agreed".
Show the terms before the first credit fill, not after a bill is late. A form to start from: the udhar agreement format. The wider terms are in the credit policy.
A worked example
Made-up figures. A bill of Rs 50,000 falls due on 30 June and is paid on 30 July, 30 days late. The agreed rate is 12% a year, simple. The rate is only an illustration, not a suggestion.
Interest = Rs 50,000 x 12% x 30 / 365 = about Rs 493. The late-payment interest calculator does this sum for any rate you enter.
Registered micro and small suppliers
A registered micro or small supplier has a separate right to interest on late payment from its buyer MSMED Act 2006, s.16. Whether a trader such as a fuel station qualifies is doubtful. Quote it in your reminders only if you hold Udyam registration and have checked. See the MSME 45-day rule.
Before you reach for interest
Interest does not bring the bill back; it adds a second amount to chase. A credit period and a limit decide how many bills turn late, so set those first: how to set a limit and when to stop credit. For a late transporter, start with a calm reminder, then the legal steps if needed.
Khata Kavach keeps the account both sides can see: every fill, numbered bills and each payment you record. It adds no interest and collects no dues.
General information, not legal advice. For your own case, speak to an advocate or a chartered accountant.
Questions people ask
01What is interest on late payment?
Extra money added to a bill paid after its due date, worked out on the unpaid amount for the days or months of delay. It stands on firm ground when agreed in advance; if nothing was agreed, a court decides Interest Act 1978, s.3.
02Udhar par byaj le sakte hain? Can I add interest to an old bill?
It stands on firmest ground when the transporter agreed in writing before the first credit fill. For an old bill with no such agreement, a court decides Interest Act 1978, s.3. Ask an advocate before you add interest to a bill you send.
03How much interest can I charge on late payment?
We give no rate. It is your decision, agreed with the transporter in writing before the first credit fill. For your own case, speak to an advocate or a chartered accountant.
04Does the MSME rule on interest apply to my late payments?
It is written for micro and small suppliers with Udyam registration MSMED Act 2006, s.15. Whether a pump qualifies is doubtful. As a buyer, your own registered suppliers may rely on it. See the MSME rule.
Related pages
About Khata Kavach (advertisement)
Khata Kavach is a shared credit book for petrol pumps, from MDG Services. The transporter asks before each truck fills, your nozzle man sees the limit before he fills, and both of you see every fill, payment and bill. It never lends or holds money.