Interest on Late GST Payment: Section 50 Rate, Calculation and Examples

The short answer

If you pay GST after the due date, you pay interest at 18% a year under Section 50 of the CGST Act, counted per day from the day after the due date until the day you pay. For tax declared in a late GSTR-3B, interest is charged only on the part you pay in cash. Tax set off from input tax credit (ITC) carries no interest.

The three parts of Section 50

Provision	When it applies	Rate	Charged on
Section 50(1)	Tax not paid by the due date	18% a year	The tax paid late
Proviso to Section 50(1)	Supplies declared in a GSTR-3B filed late	18% a year	Only the tax paid from the electronic cash ledger
Section 50(3)	ITC wrongly availed and utilised	18% a year	The wrongly availed ITC that was actually used

The rates come from Notification 13/2017-Central Tax. The rate for Section 50(3) was cut from 24% to 18% by Notification 9/2022-Central Tax, with effect from 1 July 2017. The cash-only proviso was made retrospective from 1 July 2017 by the Finance Act 2021.

One exception: the cash-only benefit does not apply if the return for that period is filed after proceedings under Section 73 or 74 have started. Then interest is due on the full tax.

How to calculate GST interest

Interest = tax paid late × 18% × number of days late ÷ 365

Count the days from the day after the due date up to and including the day of payment (the day the cash ledger is debited when you file).

Worked example

Anita is a monthly filer. Her August 2026 GSTR-3B is due on 20 September 2026. She files it on 10 October 2026, 20 days late.

Item	Amount
Output tax for August 2026	₹1,00,000
Set off from ITC	₹60,000
Paid in cash	₹40,000
Interest: ₹40,000 × 18% × 20 ÷ 365	₹394.52 (≈ ₹395)

If interest were charged on the full ₹1,00,000, it would be about ₹986. Rule 88B(1) limits it to the cash part, ₹40,000.

Interest on wrongly claimed ITC (Rule 88B(3))

Claiming ITC you are not entitled to does not by itself attract interest. Interest at 18% starts only when that wrong credit is used. Rule 88B(3) says the credit is used when the balance in your electronic credit ledger falls below the wrongly availed amount. Interest runs on that shortfall from the date it falls until you reverse or pay it.

Example: Your credit ledger has ₹50,000. You wrongly claim ₹20,000, so the balance is ₹70,000. Next month you use ₹60,000 to pay tax, leaving ₹10,000. The balance is now ₹10,000 below the ₹20,000 wrong credit, so ₹10,000 of it has been used. Interest is due on ₹10,000 from that date. Reverse the ₹20,000 in GSTR-3B Table 4B or pay through DRC-03 to stop it.

How interest is paid

• Only in cash. ITC can pay output tax, never interest, late fee or penalty. Deposit the amount with a challan (PMT-06) under the Interest minor head of the right tax (CGST, SGST, IGST or cess).
• In GSTR-3B: interest goes in Table 5.1 and is paid in Table 6.1. For a late previous return, the portal may pre-fill a system-computed interest in Table 5.1. Check it and add any other interest you owe.
• Outside a return: interest on tax found short later is paid with the tax through DRC-03, for example after a DRC-01B intimation or a scrutiny notice.

Interest vs late fee

	Interest (Section 50)	Late fee (Section 47)
Why	Tax paid late	Return filed late
Amount	18% a year on the late tax	₹50 a day (₹25 CGST + ₹25 SGST); ₹20 a day for a nil return
Cap	None	GSTR-3B: ₹500 for a nil return; ₹2,000, ₹5,000 or ₹10,000 by turnover (Notification 19/2021)
Nil return	No tax, so no interest	Still charged

A late GSTR-3B with tax to pay usually carries both. See the GST return due dates to avoid either.

Tips to keep interest low

1. File GSTR-3B by the due date even if you can only pay part of the tax. Interest runs only on the unpaid part.
2. Use your ITC first. Under the cash-only rule, every rupee set off from credit is a rupee with no interest.
3. Reverse doubtful ITC before you use it. Interest under Rule 88B(3) starts only when the ledger balance falls below the wrong credit.
4. Found a short payment? Pay it with interest through DRC-03 before a notice arrives.

Practise it before it costs you

On IndIaTaxSim you can file a GSTR-3B late on a copy of the portal, press RE-COMPUTE INTEREST, pay the challan and watch the cash ledger. Module 15 of the GST Portal Walkthrough covers GSTR-3B payment, interest and the challan, and the GST Practice Lab has a wrong-head challan and a DRC-03 case to work through.