GSTN Advisory on Interest Collection and Major Enhancements in GSTR-3B.

(Effective from January 2026 Tax Period)

1. Background of the Advisory

The Goods and Services Tax Network (GSTN) has issued an important advisory announcing multiple system-level enhancements in GSTR-3B, applicable from the January 2026 tax period onwards.

These changes primarily focus on:

• Accurate interest computation
• Transparent tax liability reporting
• Flexible ITC cross-utilisation
• Recovery of interest in final returns of cancelled registrations

The objective is to align portal functionality with statutory provisions, particularly Section 50 of the CGST Act, 2017 and Rule 88B of the CGST Rules, 2017, and to reduce disputes arising from incorrect interest calculation 

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2. Update in Interest Computation for GSTR-3B (Table 5.1)

2.1 Position before January 2026

Earlier, the GST portal calculated interest without considering the cash balance lying in the Electronic Cash Ledger (ECL). Even if sufficient cash was available, interest was computed on the entire net tax liability, leading to:

• Excess interest demand
• Frequent reconciliations
• Litigation and representations

2.2 New Enhancement from January 2026

From January 2026 tax period onwards, the GST portal will compute interest in Table 5.1 of GSTR-3B by giving the benefit of the minimum cash balance available in the Electronic Cash Ledger from:

• the due date of return, up to
• the actual date of tax payment (offset)

This enhancement is strictly in line with the proviso to Rule 88B(1) of the CGST Rules, 2017 

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2.3 Revised Interest Computation Formula

The GSTN has officially prescribed the following revised formula:

Interest = (Net Tax Liability - Minimum Cash Balance in ECL from due date to date of debit) × (Number of days of delay / 365) × Applicable Interest Rate

This ensures that interest is charged only on the portion of tax not backed by available cash balance.

2.4 Applicability Timeline

• Applicable for delayed returns of January 2026 tax period
• Interest will be auto-populated in February 2026 GSTR-3B 

3. System-Computed Interest in Table 5.1 - Key Compliance Points

3.1 Non-Editable Interest (Downward Restriction)

• Interest auto-populated in Table 5.1 will be non-editable downward
• Taxpayers cannot reduce the system-computed interest amount 

3.2 Self-Assessment Still Mandatory

• The auto-populated interest represents only the minimum interest payable
• Taxpayers must:
  • Independently compute interest
  • Increase the amount (upward modification) if actual liability is higher

Important: Responsibility for correct interest payment continues to rest with the taxpayer.

4. Auto-Population of Tax Liability Breakup Table in GSTR-3B

4.1 What is the Tax Liability Breakup Table?

This table captures:

• Supplies belonging to previous tax periods
• Reported now in current GSTR-1 / GSTR-1A / IFF
• For which tax is paid in the current GSTR-3B

4.2 New Auto-Population Mechanism

From January 2026 onwards, the GST portal will auto-populate the “Tax Liability Breakup Table” in GSTR-3B based on:

• Document dates of invoices/debit notes
• Data reported in GSTR-1 / GSTR-1A / IFF
• Where corresponding tax is discharged in current GSTR-3B 

4.3 Nature of Auto-Populated Data

• Values are suggestive, not final
• Taxpayers can modify upwards if required
• Helps in:
  • Proper interest attribution
  • Clear audit trail
  • Reduction of departmental queries

Navigation Path:
Login → GSTR-3B Dashboard → Table 6.1 (Payment of Tax) → Tax Liability Breakup 

5. Update in Table 6.1 - Suggestive Cross-Utilisation of ITC

5.1 Existing Restriction

Previously, system limitations restricted ITC utilisation sequence, causing practical difficulties even when ITC was legally available.

5.2 Enhancement from January 2026

Once IGST ITC is fully exhausted, the GST portal will now allow:

• Payment of IGST liability
• Using CGST and SGST ITC
• In any sequence chosen by the taxpayer 

This provides operational flexibility and aligns portal logic with Section 49 of the CGST Act.

6. Collection of Interest in GSTR-10 (Final Return)

6.1 Issue Addressed

In case of cancelled registrations, interest on delayed filing of the last applicable GSTR-3B often remained unpaid.

6.2 New Provision

If:

• Registration is cancelled, and
• Last applicable GSTR-3B is filed after due date

Then:

• Applicable interest will be levied and collected through GSTR-10 (Final Return) 

This makes GSTR-10 filing financially critical for cancelled taxpayers.

7. Practical Impact for Taxpayers & Professionals

Benefits

• Fair interest computation
• Reduced litigation
• System-driven transparency
• Better compliance certainty

Key Action Points

• Maintain adequate cash balance before due date
• Regularly reconcile GSTR-1 vs GSTR-3B
• Independently compute interest despite auto-population
• Exercise caution while filing final returns (GSTR-10)

8. Conclusion

The GSTN’s January 2026 enhancements mark a significant shift towards law-aligned, technology-driven compliance. While automation reduces errors, professional judgment and self-assessment remain indispensable.

Taxpayers and consultants must adapt systems, educate clients, and update SOPs well before January 2026 to avoid interest exposure and compliance lapses.

Disclaimer

This article is prepared solely for educational purposes. It does not constitute legal advice. For statutory compliance, please refer to the CGST Act, 2017, CGST Rules, 2017, and official GST notifications and advisories 

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