Rule 88B (1) of the GGST Rules, 2017 aims to rationalize interest liability and avoid undue burden on taxpayers who deposit cash on time but delay filing the return. Here’s a detailed look at what Rule 88B(1) states and its practical implications.
What Does Rule 88B(1) Say?
Rule 88B(1) applies when a registered person files a GST return (GSTR 3B) late (after the due date), but before the initiation of proceedings under Sections 73, 74, or 74A. The law specifies that:
Interest shall be payable only on the portion of tax paid through the Electronic Cash Ledger, and only for the period of delay, i.e., from the due date of return filing to the actual filing date.
This is a significant shift from the earlier interpretation, where interest was calculated on the entire tax liability, regardless of how the tax was paid.
Important Proviso: Relief from Interest in Certain Cases
A key solution is provided through the following proviso:
“If an amount is credited to the Electronic Cash Ledger on or before the due date, but the return is filed late and the amount is debited at the time of filing, no interest will be levied on such amount, provided it remained unutilized in the ledger between the due date and the actual filing date.”
This means if the taxpayer paid the tax in cash on time (i.e., credited the ledger before the due date), but delayed filing the return, interest will not apply to this portion, assuming the funds remained untouched in the ECL.
Let us understand this with the help of an example
- GSTR-3B due date: 20th June
- You deposit ₹1,00,000 in the Electronic Cash Ledger: on 19th June
- You file GSTR-3B: on 28th June
- You use the ₹1,00,000 from ECL while filing
Since the amount was deposited in time and remained unused in the ledger until filing, no interest is payable on this amount, even though the return was filed 8 days late.
However, if you deposited the amount on 25th June (i.e., after the due date), interest would be applicable for the delay (20th to 25th June).
Key Conditions to Claim Interest Exemption
To benefit from the proviso, the following conditions must be met:
| Condition | Requirement |
| Tax deposited via ECL | On or before the due date |
| Return filing | Done after the due date (but before 73/74/74A proceedings) |
| Amount usage | Debited at the time of late filing |
| Amount status | Unused in the ECL from due date to date of filing |
If any of these conditions are not met, interest will apply on the amount paid through the cash ledger.
Conclusion
Rule 88B(1) of the CGST Act is a welcome move for GST compliance. It ensures that interest is levied only when there’s an actual delay in tax payment, and not just return filing. Taxpayers should be mindful to credit the Electronic Cash Ledger on or before the due date to avoid unnecessary interest costs, even if they face delays in return filing.
By aligning legal provisions with the practical realities of business, the GST law continues to evolve toward greater clarity and taxpayer fairness.
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