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interest on reversal of ITC wrongly claimed, Goods and Services Tax - GST

Issue Id: - 116600
Dated: 4-8-2020
By:- tejas kulkarni
interest on reversal of ITC wrongly claimed

  • Contents

I have wrongly claimed ITC of IGST on inputs of rs 5,00,000 in the month of april and i reversed it immediately in the month of june. However till june amount of ITC is remained as unutilised credit in credit ledger. i have not used the ITC against liability to that extent

. Whether i need to pay interest from the date of availment of itc till the date of itc reversal even if i have not utilised the same.?

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Posts / Replies

Showing Replies 1 to 10 of 10 Records

1 Dated: 4-8-2020

Section 50(3) of the Act provides that a taxable person who makes an undue or excess claim of the ITC under Section 42(10) shall pay an interest at the rate not exceeding 24% on such undue or excess claim.

2 Dated: 4-8-2020
By:- Mahir S

Yes. I agree with above views.

When recipient has made an excess or undue claim of ITC as per section 42(10) of the Act, rate of interest applicable will be 24%.

3 Dated: 5-8-2020
By:- Alkesh Jani


I dont know how far this may help you, but I find it relevant to mention,

"The provisions underlying Section 73 is self eloquent and it is only if such availment is for reducing a tax liability that it vests jurisdiction in the assessing authority to recover such tax together with levy of interest and penalty under section 50 but until such time that the statutory authority is able to demonstrate that any tax was recoverable from the petitioner, a reflection in the electronic credit ledger cannot be treated as an ‘availment’."

High Court -Patna

4 Dated: 5-8-2020

I agree with Sh.Alkesh Jani Ji. If there is reduction in output tax liability as result of mismatching, then interest is payable otherwise not. In other words, if you have not utilised ITC taken, you are not required to pay interest.

ITC reversed amounts to ITC not taken.

5 Dated: 5-8-2020
By:- Mahir S

If this had been the intention of the Govt, then section 50 and 42 of the Act would not have been formed at all.

In this way, all will avail excess or wrong input credit and if detected, they will reverse saying they have only availed n not utilised.

To overcome this scenario, interest clause at a very higher rate has been rightly inserted by the authority.

6 Dated: 6-8-2020
By:- Alkesh Jani


I am of the view that Section 42(10) of the CGST Act,2017 comes into play after adhering to Section 42(3) and 42(5). As on now no such communication facility is available. Return GSTR-2 and GSTR-3 are in abeyance, where facility to upload the invoice by recipient is not available and GSTR-2A is only to view. Therefore, Section 42(10) cannot be invoked in the present condition and therefore, Section 50(3) will also not applicable.

7 Dated: 6-8-2020

Dear Alkesh Jani Ji,

You are absolutely right. As per Section 50 (3) interest is payable on two grounds and these are ;

(i) ITC claimed is undue or excess.

(ii) Undue or excess ITC claimed should be according to the parameters laid down under Section 42 (10) or Section 43(10) of CGST Act.

There is no dispute or confusion or doubt about above two situations. It is a fact that the functionality of matching inward supplies or output tax liability has not been activated on the Common Portal System till date. In the absence of this functionality, the department cannot ascertain undue or excess claim of ITC.

In the instant case, the querist has availed ITC wrongly in April and on realising the mistake reversed the credit in June on his own. Thus the mistake has been rectified in June. Now as and when the functionality of matching inward supplies and output tax liability become operational on the Common Portal System, the ITC availed will be found matched as it stands already rectified before pointing out by the Common Portal System.

Hence no question of payment of interest arises.

8 Dated: 14-8-2020

Hello Sir,

Good Afternoon,

This is Arun Kumar, Working in a

Just i want to clarify regarding in house line rejection processing cost, we need to charge GST on supplier or not required.

normally our vendor's are accepted for purchase returns and line rejection material cost with GST but processing cost concept they have accept without GST.

Kindly advise us, If we need to charge GST on rejection part processing cost.

if charge GST I have to show our GSTR-1 outward liability or

I have to reduce my Input GST balance in GSTR-3B.

Also supplier point of view, if charge GST, they can also able to take the GST credit.


Arun Kumar.T


9 Dated: 14-8-2020
By:- Bhavika Chothani

If you have used this ITC to pay your liability then you will have to pay an interest of 24%. But as you said it is unutilised ITC then you need to pay any interest

10 Dated: 17-8-2020

Dear Bhavika Chothani sir,

Thank you for your reply.

Do you have any notification and section for in house line rejection processing cost is liable to charge GST.

If you have a documentary evidence, kindly share with us.

Thanks & Regards
Arun Kumar.T


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