interest on wrongly availed ITC, Goods and Services Tax - GST

[AMIT BATHAM]

Respected learned expert, suppose Mr. XYZ wrongly utilize ITC in the year 2017-2018, but his credit ledger never fell below the amount utilized during the relevant year, i.e. 2017-2018, then my first question is whether interest will be charged if ITC is reversed in the year 2021-2022.

Second as per explanation given in rule 88 b input tax credit wrongly availed shall be construed to have been utilised

1. the date of utilisation of such input tax credit shall be taken to be, -

a. the date, on which the return is due to be furnished under section 39 or the actual date of filing of the said return, whichever is earlier, if the balance in the electronic credit ledger falls below the amount of input tax credit wrongly availed, on account of payment of tax through the said return; or

b. the date of debit in the electronic credit ledger when the balance in the electronic credit ledger falls below amount of input tax credit wrongly availed, in all other cases

• According to my understanding, ITC qualifies as wrongly used from the day its credit ledger balance falls below that amount, and if it does not fall below that amount in that year, no interest is charged because it is not considered wrongfully utilized in that year. Please shed some insight on whether I am accurate or not.

Posts / Replies

[Shilpi Jain]

If your ITC balance did not fall below the value of ITC wrongly availed, until the date of reversal, no interest will apply.

Say if you had availed wrong ITC to the extent of Rs. 5L and from the date of wrongly availing such credit until the date you actually reverse such credit if the balance in your ITC ledger in the GST portal has not fallen below Rs. 5L then you will not be liable for interest.

[Ganeshan Kalyani]

Sec. 50 provides for interest on ITC availed and utilised wrongly. So, if the balance is below the ITC availed till the time of reversal it is construed as not utilised. Hence, no interest is applicable.