What is Rule 88B (GST net cash interest)?
Reviewed by CA Apurav GargLast reviewed
In short
Rule 88B of the CGST Rules charges interest on late GST only on the part paid in cash, not the part set off from input tax credit, and sets how interest on wrongly used credit is worked out.
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Interest on a late return: only the cash part
Section 50(1) of the CGST Act charges interest when GST is paid after it is due. Its proviso, and rule 88B(1), limit that interest when the supplies are declared in the return for the right month and only the return is late: interest is charged on the tax paid in cash, by debiting the electronic cash ledger, for the days of delay. The part set off from input tax credit carries no interest, because that credit was already with the government. This relief does not apply if the late return is filed after proceedings under section 73 or 74 have begun for that period.
This "net cash" basis applies from 1 July 2017, the date rule 88B was given effect from.
Cash already in the ledger
Since an amendment in July 2024, cash deposited in the electronic cash ledger on or before the due date, and left there until it is used to file the late return, is not counted for interest. Depositing the tax on time limits the interest even if the return itself is filed late.
Tax paid in a later month or after a notice
Rule 88B(2) covers other cases, such as a sale left out of the right month's return and paid in a later one, or tax paid after a notice. Interest is then charged on the tax that remained unpaid, from the date it was due until it was paid. The net cash relief does not apply in the same way, so the interest can be higher than in the worked example below.
Interest on wrongly claimed credit
Section 50(3) charges interest on input tax credit that was wrongly claimed and used. Rule 88B(3) defines "used":
- Credit is treated as used when the electronic credit ledger balance falls below the wrongly claimed amount, and only to the extent it falls below it.
- Interest runs from the date of that fall until the credit is reversed or paid back.
So credit wrongly claimed but never used, because the ledger balance always stayed above it, attracts no interest when it is reversed.
What goes wrong
- Paying interest on the gross tax. Rule 88B limits it to the cash part where the conditions are met.
- Depositing cash late along with the return, instead of on the due date, and losing the July 2024 relief.
- Not reversing wrong credit quickly. The longer the ledger stays below the wrongly claimed amount, the more interest builds up.
Example in rupees
Late return. A seller files its GSTR-3B for a month 20 days after the due date:
| Figure | Amount |
|---|---|
| GST payable for the month | ₹5,00,000 |
| Paid by setting off input tax credit | ₹3,80,000 |
| Paid in cash | ₹1,20,000 |
| Of the cash: already in the electronic cash ledger on the due date, and left there until the return was filed | ₹50,000 |
| Amount interest is charged on | ₹70,000 |
Interest runs for 20 days on ₹70,000, not on ₹5,00,000 or ₹1,20,000.
Wrongly claimed credit. The same seller wrongly claimed ₹1,00,000 of credit. Its electronic credit ledger balance later fell to ₹40,000 before it reversed the claim. The credit is treated as used to the extent of the fall below ₹1,00,000, that is ₹60,000, and interest runs on ₹60,000 from the date the balance fell until the date of reversal. Had the balance never gone below ₹1,00,000, no interest would be due on this credit.
Interest is worked out at the rate notified under section 50. The figures are illustrative.
Legal reference: CGST Act, 2017: section 50(1) and (3); CGST Rules, 2017: rule 88B, inserted by Notification No. 14/2022–Central Tax with effect from 1 July 2017, and amended by Notification No. 12/2024–Central Tax
Related terms
Work it out for your business
Want help applying this to your own accounts?
We handle bookkeeping, GST and TDS for D2C and marketplace sellers, and can walk you through how this works in your business.
General information only, not professional advice. Rules and rates change — check the official source before you act.