No interest between Cash Ledger deposit and filing GSTR-3B - what the Gujarat HC just clarified (2025)

Bottom line: If you deposited tax into the Electronic Cash Ledger (ECL) and that money already stood credited to the Government, no interest under Section 50 can be demanded for the period between that deposit and the later filing of GSTR-3B. The Gujarat High Court has quashed such interest demands and recovery notices.

What the Court held (in plain English)

1. Deposit = payment to Government.

Once you generate a challan and the amount is credited to the Government (enters your ECL), your tax liability stands covered to that extent. Any later “debit” at the time of filing GSTR-3B is mere accounting adjustment, not fresh payment. Therefore, interest can’t run during this interim window.

1. Recovery notices set aside.

Departmental communications demanding interest for this “deposit-to-filing” gap and recovery under Section 79 were quashed.

1. Why?

Interest under Section 50 is compensatory-meant to compensate the exchequer for the period of non-payment. If the Government already holds the money (in your ECL), there is no loss of use to compensate.

Statutory framework (why the Court said so)

• Section 49 CGST Act + Rule 87 CGST Rules: deposits made via challan are credited to the Electronic Cash Ledger; that credit represents money with the Government awaiting set-off.
• Section 50(1) CGST Act (proviso): interest on delayed returns is payable only on the portion paid by cash; the Court clarifies this doesn’t allow interest to run after the cash has already been deposited into ECL and before return filing.
• The Court followed its earlier view (e.g., Arya Cotton Industries) and rejected contrary readings that treat ECL credit as if it were not payment until return filing.

Practical implications for taxpayers & consultants

• Deposit early, even if return will be late.

If you foresee a delay in filing GSTR-3B, deposit the tax into ECL as soon as possible. Interest exposure (for cash-paid portion) stops from the date of deposit. Keep challan/ECL statements.

• Check interest notices carefully.

If a notice computes interest up to the GSTR-3B filing date (ignoring your earlier ECL deposit), respond with the ruling and recompute interest only up to the ECL deposit date.

• Cash vs. ITC matters.

This protection applies to cash portion (ECL). Separate rules govern wrong availment/ utilisation of ITC (Rule 88B; interest runs from utilisation).

• Jurisdiction note.

This is a Gujarat High Court decision-binding in Gujarat; persuasive elsewhere unless there’s contrary binding precedent. Still, it’s a strong, reasoned view grounded in the Act and Rules.

Worked example

• Tax due (cash portion): ₹10,00,000
• Due date: 20 Aug
• You deposit into ECL: 28 Aug
• You file GSTR-3B: 15 Sep

Interest window: 21-27 Aug only (till ECL deposit date). No interest from 28 Aug to 15 Sep, because the Government already had the money.

How to respond to a demand (template points)

• Attach challan(s) and PMT-05/PMT-06/ECL extract showing date of credit to ECL.
• State: “In view of the Gujarat High Court ruling, amounts credited to ECL constitute payment to Government; therefore no interest is leviable from the date of ECL credit till the date of filing GSTR-3B. Kindly recompute interest only up to the ECL credit date and withdraw recovery under Section 79.”

Compliance checklist (do this now)

• Always generate challan and deposit as soon as tax is known-even if return will be late.
• Maintain ECL ledger prints and challans in your working papers.
• If you receive a notice, reconcile GSTR-1 vs GSTR-3B differences, show ECL credit date, and cite the ruling.

Key takeaway

Cash deposited into ECL = Government already has your money. Interest under Section 50 stops from that date. Any interest for the gap until GSTR-3B filing is not payable-and recovery notices based on that gap should be dropped.

For More Information Please Contact :

Dr. Muhammed Mustafa C T.
Senior Tax Consultant, BRQ Associates
???? +91 96331 81898
???? brqassociates@gmail.com | ???? www.brqassociates.com