Vivek Jalan
The GST Council and GSTN have introduced significant changes in how interest on delayed tax payments is computed and collected. These changes, effective from March 2026, may result in increased interest cost at the time of return filing for the taxpayers. Under the new formula, interest is calculated on the net tax liability after adjusting for the minimum cash balance in the electronic cash ledger, multiplied by the number of days delayed and the applicable rate.
The Formula is as follows:
Interest = (Net Tax Liability-Minimum Cash Balance in ECL) × No.of days delayed/365 × Applicable Rate
Example:
- Net tax liability (Output Liability – ITC) = Rs 1,00,000
- Minimum cash balance in ECL = Rs 20,000
- Delay = 30 days
- Interest rate = 18%
Interest = (1,00,000-20,000)×30/365×18% = Rs 1,184
Auto-Population of Tax Liability Breakup in GSTR-3B
Another major change is the auto-population of the tax liability breakup table in GSTR-3B based on the document date. This means that if an invoice dated December 2025 is reported in the January 2026 return, the portal will automatically compute interest for the delay. Similarly, reversals of credit notes from earlier periods or debit notes reported late may also trigger interest, making document timing critical for compliance.
Let's understand by means of an example:
Suppose a taxpayer issues an invoice on 15 December 2025 but forgets to report it in the December return. Instead, they declare it in the January 2026 GSTR-3B. Since the system now considers the document date rather than just the reporting period, the GST portal will automatically compute interest for the delay as follows:
- Tax liability on the invoice = Rs 50,000
- Due date for December return = 20 January 2026
- Actual reporting = January 2026 return filed on 20 February 2026
- Delay = 31 days (from 20 Jan to 20 Feb)
- Interest rate = 18%
Interest=50,000×31/365×18%= Rs 765
This Rs 765 interest will be auto-populated by the system in the January return, and the taxpayer cannot reduce it.
Similarly, if a credit note reversal from an earlier period or a debit note reported late is declared in the current return, the portal may automatically compute interest based on the mismatch in document dates.
Collection of Interest in GSTR-10 (Final Return)
Finally, for cancelled taxpayers, if the last applicable GSTR-3B is filed late, the interest will be collected through GSTR-10, the final return. For example, if a taxpayer's registration is cancelled on December 31, 2025, but the last GSTR-3B is filed on January 20, 2026, interest for the delay will be added to the GSTR-10 liability.
CAclubindia
