Amendment in GST Interest Calculation on Delayed Cash Payment in GSTR-3B

 The GST framework for interest calculation on delayed payment of tax in GSTR-3B has been amended, effective from the January 2026 tax period, as clarified through GSTN Advisory No. 647 dated 30 January 2026. The amendment reduces the interest burden on taxpayers by restricting interest liability to the portion of tax that remains unpaid in cash after considering both input tax credit (ITC) set-off and the minimum balance available in the electronic cash ledger. Under the revised method, taxpayers first determine total tax liability, reduce the available ITC, and compute the net tax payable in cash. Interest is then calculated only on the difference between this net liability and the minimum cash balance available in the electronic cash ledger between the return due date and the date of liability offset. Interest at 18% per annum applies from the day after the return due date until the date of set-off. If tax liability is fully paid through ITC or sufficient cash balance exists before the due date, no interest arises.

1. Coverage of this article:

a. In this article, I am discussing about the applicability of GST provisions after amendment in GST Interest Calculation on Delayed Cash Payment in GSTR-3B.

b. GSTN Advisory No. 647 issued on 30th January 2026.

2. Amendment made in interest computation:

a. Government has made a significant amendment in interest computation which is applicable from Jan 26 tax period.

b. It is a great initiative taken by our Government which reduces the interest liability of the taxpayer.

3. Amount on which interest will be levied:

a. Determine the tax liability on supply

b. Determine the set off amount of ITC

c. Difference of (a) – (b) is the net tax liability

d. Determine the minimum cash balance available in Electronic Cash Ledger from the due date of return till the date of liability offset.

e. Interest will be charged on the difference of (C) – (D) which is explained below.

f. Calculate these amount separately for each head i.e. CGST, SGST & IGST.

4. Practical scenario 1:

a. Interest will be levied on Rs 1,00,000 instead of Rs 3,00,000.

b. We need to check the minimum cash balance in cash ledger from the due date of return till the date of liability offset.

 5. 1^st Explanation of minimum cash balance:

a. Cash balance in the ledger on 20^th May is 2,00,000

b. Cash of 1,00,000 deposited on 22^nd May

c. Date of setoff is also 22^nd May

d. Minimum balance from 20^th to 22^nd May is 2,00,000 instead of 3,00,000

e. Benefit of 2,00,000 is available in interest computation.

f. As per provision, we need to calculate the minimum cash available in the ledger during this period.

6. 2^nd Explanation of minimum cash balance:

a. Cash balance in the ledger on 20^th May is 2,00,000

b. Cash of 1,00,000 deposited on 22^nd May

c. Cash used in DRC 03 of Rs 2,50,000 on 22^nd May

d. Date of setoff is also 22^nd May

e. Minimum balance from 20^th to 22^nd May is 50,000 instead of 3,00,000

f. Benefit of 50,000 is available in interest computation.

g. As per provision, we need to calculate the minimum cash available in the ledger during this period.

7. Interest rate on tax:

a. Interest will be levied @18% in case of delayed payment of tax.

b. This rate is bases on per annum basis instead of per month.

8. Situations for interest calculation:

a. There are 3 situations related to number of day calculation for interest liability.

b. One is interest will be paid from the next day of due date of return till the date of payment in the cash ledger.

c. 2^nd is interest will be paid from the next day of due date of return till the date of offset liability.

d. 3^rd is interest will be paid from the next day of due date of return till the date of filing of GSTR-3B.

9. No. of days for interest calculation

a. Interest will be levied from the next day of due date of return till the date of offset liability.

b. Because at the time of setoff liability, the payment is credited in the Government account & it is debited from our cash ledger.

c. Interest will not be levied till the date of cash deposited in the ledger or till the date of filing of return.

d. Interest will be computed separately for each head of liability.

10. When interest will be levied?

a. If GSTR-3B is filed within due date, it means tax liability has been setoff within due date then there will be no interest liability.

b. If GSTR-3B is filed after due date, but tax liability has been setoff within due date then there will be no interest liability.

c. If GSTR-3B is filed after due date & tax liability has also been set-off after due date then there will be an interest liability.

d. If no tax payment required in cash then no interest liability will be arise even if GSTR-3B filed after due date.

e. Interest will be levied if tax paid in cash.

11. Practical scenario 2:

a. Interest is levied from 21^st till date of set off.

b. If minimum balance available in ledger then no interest will be paid.

c. Interest will be computed separately for each head of liability.

12. Practical scenario 3:

a. Interest is levied from 21^st till date of set off.

b. If minimum balance available in ledger then no interest will be paid.

c. Interest will be computed separately for each head of liability.

13. Practical scenario 4:

a. In this case, tax is paid till the due date. Therefore, there will be no interest liability.

b. Also, GSTR-3B is filed within due date.

c. Interest will be computed separately for each head of liability.

14. Practical scenario 5:

a. In this case, tax is paid till the due date. Therefore, there will be no interest liability.

b. But, GSTR-3B is filed after the due date which is not relevant for interest computation.

c. Interest will be computed separately for each head of liability.

15. Practical scenario 6:

a. In this case, there is no tax liability in cash. Therefore, there will be no interest liability.

b. Also, GSTR-3B is filed within the due date which is not relevant for interest computation.

c. Interest will be computed separately for each head of liability, if any.

16. Practical scenario 7:

a. In this case, there is no tax liability in cash. Therefore, there will be no interest liability.

b. Also, GSTR-3B is not filed within the due date which is not relevant for interest computation.

c. Interest will be computed separately for each head of liability, if any.

17. Note:

a. If no tax liability in cash & return is filed within the due date then there will be no interest liability.

b. If no tax liability in cash but return is not filed within the due date then there will be no interest liability.

c. If there is a tax liability in cash & return is filed within the due date then there will be no interest liability.

d. If there is a tax liability in cash & setoff is done within the due date then there will be no interest liability.

c. If there is a tax liability in cash but setoff is not done within the due date then there will be an interest liability.

 18. Payment of interest:

a. Interest shall be paid in cash.

b. ITC cannot be utilised against the payment of interest.

c. Interest will be paid in the next month GSTR-3B.

19. Bare Act:

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Disclaimer: The views and opinions expressed in this article are those of the author. This article is intended for general information purposes only and does not constitute professional advice. Readers are strongly advised to consult a qualified professional for guidance specific to their individual situation before making any financial, legal, or tax-related decisions. The author shall not be held liable for any loss or damage of any kind incurred as a result of the use of this information or for any actions taken based on the content of this article.