What is Interest and Late Fee under the GST Act?
Interest under GST
Interest is applicable when a registered taxpayer:
- Pays GST after the prescribed due date
- Has short-paid tax
- Has wrongly availed and utilised Input Tax Credit (ITC)
Interest is governed by Section 50 of the CGST Act, 2017, read with Rule 88B of the CGST Rules, 2017.
Applicable Interest Rates
| Particulars |
Interest Rate |
| Delay in payment of tax (net cash liability) |
18% per annum |
| Wrongly availed and utilised ITC / undue reduction of output tax liability |
Up to 24% per annum |
Late Fee under GST
A late fee is applicable when a taxpayer fails to file GST returns within the prescribed due date.
Late fee is charged per day of delay and applies even in case of NIL returns.
Late Fee for GSTR-3B
| Act |
Normal Return |
NIL Return |
| CGST |
₹25 per day |
₹10 per day |
| SGST / UTGST |
₹25 per day |
₹10 per day |
| IGST |
₹50 per day |
₹20 per day |
Total Late Fee: ₹50 per day for normal returns, ₹20 per day for NIL returns.
(Late fee is subject to maximum limits as notified by the Government from time to time.)
Latest Update in Interest Computation (Effective January 2026)
From the January 2026 tax period onwards, the GST portal has enhanced the computation of interest in GSTR-3B.
Revised Interest Computation Formula
Interest = (Net Tax Liability – Minimum Cash Balance in Electronic Cash Ledger from due date till date of payment) × (No. of days delayed ÷ 365) × Applicable Interest Rate
The minimum available cash balance is the lowest balance on any day in the Electronic Cash Ledger between the due date and the payment date.
What this Means for Taxpayers
- The system now gives the benefit of the minimum balance available in the Electronic Cash Ledger (ECL) during the delay period.
- Interest auto-populated in GSTR-3B (Table 5.1) is:
- Non-editable downward
- The minimum interest required to be paid
- Taxpayers may increase the amount if their self-assessment shows a higher liability.
- This enhancement aligns computation with Section 50 and Rule 88B.
How is Interest Calculated?
Step 1: Determine Period of Delay
Delay = Filing date – Due date
Interest is calculated from the day after the due date till date of payment.
Step 2: Identify Net Cash Liability
Net Cash Liability = Tax payable after ITC utilisation
Step 3: Apply Formula
Interest = (Net Cash Liability – Minimum Cash Balance in ECL during the delay period) × (Days of Delay ÷ 365) × Applicable Rate
- 18% for the delayed payment of tax
- Up to 24% where ITC has been wrongly availed and utilised
Illustration
Assume:
- Due Date: 20 April 2026
- Filing Date: 30 May 2026
- Delay: 40 days
- Net Cash Liability: ₹1,00,000
- Minimum Cash Balance in ECL during delay: ₹20,000
Interest Base = ₹1,00,000 – ₹20,000 = ₹80,000
Interest = 80,000 × 40 / 365 × 18% = ₹1,578 (approx.)
If the case involves wrongly availed and utilised ITC, interest may apply at up to 24%.
Additional Portal Enhancements (From January 2026)
- System-Computed Interest in Table 5.1: Interest auto-populated in GSTR-3B is the minimum payable and cannot be reduced.
- Auto-Populated Tax Liability Breakup: Tax liability breakup table is auto-populated based on document dates reported in GSTR-1 / GSTR-1A / IFF for previous periods.
- Suggestive Cross-Utilisation of ITC: After exhausting IGST ITC, the portal allows utilisation of CGST and SGST ITC for IGST liability in any sequence.
- Interest in GSTR-10: In case of cancelled registrations, interest on delayed filing of last applicable GSTR-3B shall be levied and collected through GSTR-10 (Final Return).
