NO INTEREST PAYABLE IF GST DEPOSITED IN CASH LEDGER BEFORE DUE DATE AND RETURN FILED LATER; AMENDMENT TO RULE 88B(1) HELD CLARIFICATORY: MADRAS HIGH COURT
In the initial phase of GST implementation, several assessees faced procedural and technical challenges which led to delays in filing Form GSTR-3B, even though the corresponding tax amounts were duly deposited in the Electronic Cash Ledger (ECL) before the due date of return filing. Despite the timely deposit of tax into the ECL, the GST authorities issued notices demanding interest on the grounds of delayed payment, arguing that payment is complete only upon debit of the ECL through return filing.
This triggered a wave of litigation, with taxpayers approaching various jurisdictional High Courts to challenge the levy of interest on tax amounts already credited to the ECL but debited belatedly due to delayed filing of returns. However, judicial interpretations have been inconsistent.
The Hon’ble Jharkhand High Court, in M/s RSB Transmissions India Ltd. v. Union of India [W.P. (T) No. 23 of 2022], ruled against the assessee and upheld the department’s contention that interest was payable until the actual debit of the ECL occurred via return filing.
Conversely, the Hon’ble Madras High Court, in Eicher Motors Ltd. v. Superintendent of GST and Central Excise [W.P. Nos. 16866 & 22013 of 2023 and W.M.P. No. 32200 of 2023, decided on 23-1-2024], delivered judgment in favour of the assessee. The Court held that no interest would be payable where the GST amount was routinely deposited into the ECL within the statutory due date. It emphasized that once tax is paid by generating Form GST PMT-06, the amount is immediately credited to the Government’s account, discharging the taxpayer’s liability to that extent.
The Court further clarified that in terms of Section 39(7) of the CGST Act, 2017, credit to the Government’s account occurs no later than the last date for filing the monthly return. Therefore, for all practical and legal purposes, the tax is considered paid on the date of deposit, and the subsequent debit through the return is only for accounting compliance. This interpretation is reinforced by the Explanation (a) to Section 49(11) of the CGST Act, which deems such deposits as credited to the ECL for accounting purposes, while the actual transfer to the Government occurs upon payment.
The Court further clarified that in terms of Section 39(7) of the CGST Act, 2017, credit to the Government’s account occurs no later than the last date for filing the monthly return. Therefore, for all practical and legal purposes, the tax is considered paid on the date of deposit, and the subsequent debit through the return is only for accounting compliance. This interpretation is reinforced by the Explanation (a) to Section 49(11) of the CGST Act, which deems such deposits as credited to the ECL for accounting purposes, while the actual transfer to the Government occurs upon payment.
Subsequently, to provide statutory clarity, the Government amended Rule 88B of the CGST Rules by inserting a proviso to Rule 88B(1) via the Central Goods and Services Tax (Amendment) Rules, 2024, effective from 10-07-2024. The inserted proviso reads as follows:
“Provided that where any amount has been credited in the Electronic Cash Ledger as per provisions of sub-section (1) of section 49 on or before the due date of filing the said return, but is debited from the said ledger for payment of tax while filing the said return after the due date, the said amount shall not be taken into consideration while calculating such interest if the said amount is lying in the said ledger from the due date till the date of its debit at the time of filing return.”
In a significant ruling reaffirming this position, the Madras High Court in Tamil Nadu State Transport Corporation (Villupuram) Ltd. v. Additional Commissioner of Central Tax [W.P. No. 9793 of 2024 and W.M.P. No. 10821 of 2024, decided on 14-3-2025] held that no interest liability arises if the tax amount is credited to the Electronic Cash Ledger before the due date, even if the return is filed later. Importantly, the Court relied upon its earlier decision in Eicher Motors Ltd. (supra) to hold that the taxpayer’s liability is discharged upon timely deposit into the cash ledger.
The Court further clarified that the amendment to Rule 88B(1) is clarificatory in nature and and therefore the question of retrospective or prospective effect will not come into picture and therefore the question of payment of interest will not arise.
Conclusion:
The legal position surrounding interest liability under GST for delayed filing of returns despite timely cash deposit has undergone significant development. With the amendment to Rule 88B(1) and judicial backing from the Madras High Court, it is now clear that no interest is payable where tax was deposited in the Electronic Cash Ledger on time, even if the return is filed late. However, the existence of conflicting High Court rulings such as that of the Jharkhand High Court means that this issue may still require resolution by the Supreme Court to ensure uniformity across jurisdictions. Until then, taxpayers can find reassurance in the clarificatory nature of the rule and the rationale adopted by the Madras High Court.
Article is written by CA Ankit Karanpuria and CA. Ankush Karanpuria The author can be reached at karanpuriaankit@gmail.com
The views expressed in the above article are personal and for information purpose. The reader is required to take decision based on his own judgment and analysis. Writer shall not be responsible for any decision taken by the reader in the subject matter.