GSTR-3B — Monthly Summary Return and Tax Payment

Learning Objectives

• Understand what GSTR-3B is and how it differs from GSTR-1
• Know every section of GSTR-3B (3.1 through 6)
• Apply ITC setoff rules in the correct sequence
• Complete Sunrise Retail's GSTR-3B for April 2025
• Understand PMT-06 and how to pay GST through the electronic cash ledger

What Is GSTR-3B?

GSTR-3B is the monthly summary return that every regular taxpayer must file. Unlike GSTR-1, which is invoice-level detail, GSTR-3B is consolidated figures — totals of tax, ITC, and the net amount payable.

GSTR-3B is the return through which you actually pay tax. If you owe GST after applying ITC, you pay it before filing GSTR-3B.

GSTR-1 vs GSTR-3B — Key Differences

Filing Deadline and Penalty

Late fee: ₹50 per day (₹25 CGST + ₹25 SGST) for returns with tax liability. Maximum ₹10,000.

Interest on late payment: 18% per annum on the outstanding tax amount from the due date.

Sections of GSTR-3B

Section 3.1 — Outward and Reverse Charge Supplies

Section 3.2 — Inter-State Supplies

Breakdown of interstate supplies made to unregistered persons (B2C) and to composition dealers, by state. This helps determine which state gets IGST share.

Section 4 — ITC Available

Section 5 — ITC Reversed / Ineligible

ITC that was claimed but must be reversed (e.g., Section 17(5) blocked items, goods used for exempt supplies, ITC for which supplier has not filed returns).

Section 6 — Tax Payable and Paid

After netting ITC against output tax, this section shows:

• Tax payable on outward supplies
• Tax payable on RCM
• Interest payable
• Late fee payable
• Tax paid through ITC (IGST, CGST, SGST balances used)
• Tax paid through cash (electronic cash ledger)

ITC Setoff Rules — The Correct Sequence

ITC can only be used in a specific order under Section 49 of the CGST Act. Wrong order means paying cash when you didn't need to.

The Rule at a Glance

ITC Setoff Cascade — Visual Flow

┌─────────────────────────────────────────────────────────────┐
│              ITC SETOFF CASCADE (Section 49)                 │
├──────────────┬──────────────────────────────────────────────┤
│ IGST ITC     │  Step 1 → IGST output first                  │
│ (most flex)  │  Step 2 → CGST output (if IGST ITC remains)  │
│              │  Step 3 → SGST output (if IGST ITC remains)  │
├──────────────┼──────────────────────────────────────────────┤
│ CGST ITC     │  Step 4 → CGST output (remaining)            │
│              │  Step 5 → IGST output (if CGST ITC remains)  │
│              │  ❌ NEVER → SGST output                       │
├──────────────┼──────────────────────────────────────────────┤
│ SGST ITC     │  Step 6 → SGST output (remaining)            │
│              │  Step 7 → IGST output (if SGST ITC remains)  │
│              │  ❌ NEVER → CGST output                       │
└──────────────┴──────────────────────────────────────────────┘

The key insight: exhaust IGST ITC across all three heads before touching CGST or SGST ITC.

Sunrise Retail — GSTR-3B for April 2025

💼 Sunrise Retail Pvt Ltd | GSTIN: 36AACCS1234A1ZP | Tax Period: April 2025

Step 1 — Compute Net Output Tax

Sales (gross):

• Digital Hub — 30 phones intrastate: ₹4,80,000 × 9% CGST = ₹43,200; × 9% SGST = ₹43,200
• CloudStore — 20 phones interstate: ₹3,30,000 × 18% IGST = ₹59,400

Returns (deduct):

• Digital Hub return — 2 phones intrastate: ₹32,000 × 9% CGST = ₹2,880; × 9% SGST = ₹2,880

Net Output Tax:

CGST output = ₹43,200 − ₹2,880 = ₹40,320
SGST output = ₹43,200 − ₹2,880 = ₹40,320
IGST output = ₹59,400 − Nil (no IGST return) = ₹59,400

Step 2 — Compute Net ITC Available

ITC from purchases:

• TechWorld Mumbai — 100 phones interstate: ₹12,00,000 × 18% IGST = ₹2,16,000 IGST ITC
• Office rent — ₹30,000 × 9% CGST = ₹2,700 CGST ITC; × 9% SGST = ₹2,700 SGST ITC

ITC reversed (purchase return):

• TechWorld return — 5 phones: ₹60,000 × 18% IGST = ₹10,800 IGST ITC reversed

Net ITC:

IGST ITC = ₹2,16,000 − ₹10,800 = ₹2,05,200
CGST ITC = ₹2,700
SGST ITC = ₹2,700

Step 3 — ITC Setoff Calculation (Sunrise Retail April 2025)

Starting position:

IGST ITC used:       ₹59,400
IGST output cleared: ₹0 payable ✓
IGST ITC remaining:  ₹2,05,200 − ₹59,400 = ₹1,45,800

IGST ITC used:       ₹40,320
CGST output cleared: ₹0 payable ✓
IGST ITC remaining:  ₹1,45,800 − ₹40,320 = ₹1,05,480

IGST ITC used:       ₹40,320
SGST output cleared: ₹0 payable ✓
IGST ITC remaining:  ₹1,05,480 − ₹40,320 = ₹65,160

CGST ITC available:  ₹2,700
CGST output due:     ₹0
CGST ITC carry fwd:  ₹2,700 (cannot cross to SGST)

SGST ITC available:  ₹2,700
SGST output due:     ₹0
SGST ITC carry fwd:  ₹2,700 (cannot cross to CGST)

Final Position — April 2025:

Cash to be paid via PMT-06: ₹0 — Sunrise Retail's purchases far exceed sales in April (startup stocking month).

GSTR-3B — Filled Form for April 2025

Section 3.1 — Outward Supplies:

Taxable value = ₹4,48,000 (intrastate net) + ₹3,30,000 (interstate) = ₹7,78,000

Section 4 — ITC Availed:

Section 5 — ITC Reversed:

Nil (no blocked ITC in April)

Section 6 — Tax Payable and Paid:

ITC Carried Forward to May 2025:

• IGST: ₹65,160
• CGST: ₹2,700
• SGST: ₹2,700

PMT-06 — Paying GST Through Electronic Cash Ledger

When GST is payable (output > ITC), you pay via Form PMT-06 — the challan.

GST Portal → Services → Payments → Create Challan (PMT-06)
→ GSTIN: 36AACCS1234A1ZP
→ Tax Period: April 2025
→ Enter amounts:
   IGST: 0   CGST: 0   SGST: 0   (in Sunrise Retail's case)
→ Payment mode: Net Banking / NEFT / RTGS / Debit Card
→ Generate Challan → Pay

Payment reflects in your Electronic Cash Ledger within minutes (net banking) or next working day (NEFT). The credit in Electronic Cash Ledger is then used to offset tax when you file GSTR-3B.

ITC Setoff — Complete Calculation for April 2025

The law mandates a strict 3-step order for applying ITC. You cannot mix CGST with SGST, or vice versa.

STEP 1 — IGST ITC: Set off against IGST Output FIRST
──────────────────────────────────────────────────────────────
  IGST ITC available         ₹2,05,200
  Less: IGST Output tax      ₹  59,400
  IGST ITC remaining         ₹1,45,800      → carry to Step 2

STEP 2 — Remaining IGST ITC: Set off against CGST Output
──────────────────────────────────────────────────────────────
  IGST ITC remaining         ₹1,45,800
  Less: CGST Output tax      ₹  40,320
  IGST ITC remaining         ₹1,05,480      → carry to Step 3

STEP 3 — Remaining IGST ITC: Set off against SGST Output
──────────────────────────────────────────────────────────────
  IGST ITC remaining         ₹1,05,480
  Less: SGST Output tax      ₹  40,320
  IGST ITC remaining         ₹  65,160      → CARRY FORWARD to May 2025

STEP 4 — CGST ITC: Set off against CGST Output
──────────────────────────────────────────────────────────────
  CGST ITC (from rent + Sparsh)   ₹11,700
  CGST Output remaining after Step 2:  ₹0  (already wiped by IGST ITC)
  CGST ITC remaining              ₹11,700   → CARRY FORWARD to May 2025

STEP 5 — SGST ITC: Set off against SGST Output
──────────────────────────────────────────────────────────────
  SGST ITC (from rent + Sparsh)   ₹11,700
  SGST Output remaining after Step 3:  ₹0  (already wiped by IGST ITC)
  SGST ITC remaining              ₹11,700   → CARRY FORWARD to May 2025

Final April 2025 Ledger Summary

Sunrise Retail owes ₹0 in cash to the government for April 2025. The total carry-forward ITC of ₹65,160 + ₹11,700 + ₹11,700 = ₹88,560 moves to May 2025.

Step-by-Step GSTR-3B Filing on GST Portal

[GST Portal → Returns → Returns Dashboard → GSTR-3B]

Step 1: Select period: April 2025 → Prepare Online

Step 2 — Section 3.1:

3.1(a) Outward taxable supplies:
  Total Taxable Value: 7,78,000
  IGST: 59,400  CGST: 40,320  SGST: 40,320
→ Confirm

Step 3 — Section 4:

4(A)(5) All other ITC:
  IGST: 2,05,200  CGST: 2,700  SGST: 2,700
→ Confirm

Step 4 — Section 6:

System auto-calculates setoff based on rules
Review: Tax payable = 0 (ITC exceeds output) → Confirm

Step 5 — Preview and File:

Preview GSTR-3B → Save for records
File → Use EVC (OTP) or DSC
ARN generated → Download acknowledgement

[Status changes to "Filed" — return is locked]

Practice Exercise

Exercise 1: In May 2025, Sunrise Retail has:

• IGST output: ₹30,000
• CGST output: ₹15,000
• SGST output: ₹15,000
• Opening ITC carried forward: IGST ₹65,160, CGST ₹2,700, SGST ₹2,700
• New IGST ITC in May: ₹10,000

What is the closing ITC position after setting off May output?

Exercise 2: Why can Sunrise Retail NOT use CGST ITC to pay SGST?

Auto-Population from GSTR-1 + GSTR-2B

The RE-COMPUTE INTEREST Button

After auto-population, you'll often see a "Re-compute Interest" button in Section 5. Click this once you've finalised your tax payable figures — the system recalculates interest under Section 50 (on net cash liability) based on:

• The number of days between the due date and the actual payment date
• The exact cash component of your liability (after ITC setoff)
• The interest rate (18% p.a. for late payment, 24% p.a. for excess ITC claim)

Re-compute before submitting — interest is the single most common silent leak in GSTR-3B filing. The auto-populated figure may be wrong if you've edited the output or ITC values, and you'll only see the corrected number after clicking re-compute.

For Sunrise Retail's April 2025 filing: Section 3.1(a) auto-fills with ₹7,78,000 taxable / ₹59,400 IGST / ₹40,320 CGST / ₹40,320 SGST — exactly what we computed from GSTR-1 Table 4 + Table 11 (Digital Hub credit note). Section 4(A)(5) auto-fills with the TechWorld + landlord IGST/CGST/SGST ITC of ₹2,05,200 / ₹2,700 / ₹2,700. Sneha only manually enters Section 3.1(d) RCM (if any) and Section 4(B) reversals (TechWorld return ₹10,800 IGST). Click "Re-compute Interest" → ₹0 (filed on time, no tax payable) → submit.

Section 50 — Interest on Delayed Payment, Worked Example

Section 50 of the CGST Act levies 18% per annum interest on any GST that's paid late. The crucial 2021 amendment (Section 50(1) proviso) clarified that interest is computed on the net cash liability — not on the gross output tax — for late filing of GSTR-3B. This single change reduced interest exposure for late filers by often 70–80%.

The Pre-2021 vs Post-2021 Rule

This is one of the most taxpayer-friendly amendments since GST roll-out. But it applies only when the delay is in filing GSTR-3B (cash wasn't paid because the return wasn't filed). For wrong ITC claim that was later reversed, the older gross-basis rule still applies, and the interest rate jumps to 24% under Section 50(3).

Worked Example — Sunrise Retail Files GSTR-3B 8 Days Late

Let's say Sunrise Retail's books for September 2025 show:

GSTR-3B due date: 20-Oct-2025. GSTR-3B actually filed: 28-Oct-2025 (8 days late).

Interest calculation under Section 50 (post-2021 rule):

Interest = Net Cash Liability × 18% p.a. × Days Delayed / 365
        = ₹2,40,000 × 18% × 8 / 365
        = ₹2,40,000 × 0.18 × 0.02192
        = ₹946.85
        ≈ ₹947 (rounded to nearest rupee)

So Sunrise Retail pays:

• Tax: ₹2,40,000 (the net cash they always had to pay)
• Interest: ₹947 (the price of 8 days' delay on the cash portion only)
• Late Fee: ₹50/day × 8 days = ₹400 (capped at ₹10,000)
• Total cost of being 8 days late: ₹947 + ₹400 = ₹1,347

Compare with pre-2021 rule (now obsolete, but useful for context):

Pre-2021 Interest = Gross Output Tax × 18% p.a. × Days Delayed / 365
                  = ₹4,20,000 × 18% × 8 / 365
                  = ₹1,657.40
                  ≈ ₹1,657

The Section 50(1) proviso saves Sunrise Retail ₹710 on this single 8-day delay. Across a year of occasional late filings, this compounds into real money for compliance-sloppy businesses.

When the Old Gross-Basis Rule Still Applies

Wrong ITC claim reversed later. If Sunrise Retail had wrongly claimed ₹50,000 ITC (say, on a blocked Section 17(5) item) and reverses it in a later GSTR-3B, interest is 24% p.a. under Section 50(3), computed on the wrongly claimed amount from the original claim date. The Section 50(1) proviso (net basis, 18%) does not apply here — because the issue isn't late payment, it's wrong claim.

Cash component is zero. If the entire output tax was offset by ITC and the cash payable on the due date was zero, late filing of GSTR-3B attracts only late fee, no interest. The cash liability is zero × 18% × any days = zero. Many small businesses with high ITC don't realise this — they panic about interest on a delayed filing that actually has no interest exposure.

Where Interest Appears on GSTR-3B

Interest goes into Section 5 — Interest and Late Fee:

Payment is via the Electronic Cash Ledger — interest and late fee can NOT be paid from the ITC ledger (same rule as RCM). Generate PMT-06 challan for the interest + late fee + any net tax, pay, then submit GSTR-3B.

Key Terms

Checklist — what you should now be able to do:

• Apply the 5-step ITC setoff cascade correctly for any set of IGST/CGST/SGST balances
• Explain why CGST and SGST ITC can never be used against each other
• Populate all sections of GSTR-3B (3.1 through Section 6) for a real dataset
• Compute the carry-forward ITC position after setoff
• Generate a PMT-06 challan and pay via the electronic cash ledger