Quick Summary
When Input Tax Credit Turns into Interest Liability - A Silent Risk under GST Input Tax Credit (ITC) is often described as the lifeline of GST. It ensures tax neutrality, improves cash flow, and makes the GST system seamless. Businesses, therefore, naturally treat ITC as a valuable asset - somethin
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FAQ :
Yes, according to the KJV Alloys ruling, prolonged retention of wrongly availed ITC for a considerable period can trigger interest liability under GST, even if it was not utilised. The court viewed such retention as conferring a financial advantage.
The taxpayer's primary defence was that the excess ITC was never utilised to pay output tax liability and was eventually reversed. They also relied on the retrospective amendment to Section 50(3) of the CGST Act, which clarified interest is payable only upon utilisation of wrongly availed credit.
The court identified the petitioner's admission of excess credit and the prolonged retention of this credit for nearly 630 days as a decisive factor. This lengthy retention was considered more than a procedural lapse and triggered interest liability.
Yes, the court held that mere assertion of non-utilisation is insufficient. Taxpayers must produce documentary evidence, such as ledger records and reconciliations, to demonstrate that the electronic credit ledger balance remained higher than the wrongly availed credit throughout the disputed period.
No, the court clarified that Input Tax Credit can only be used for paying output tax. Interest liability must be discharged using the electronic cash ledger.
Yes, the court held that GST interest is statutory and arises automatically upon satisfaction of the conditions for levy. If excess credit is admitted and reversed, the resulting interest liability is self-assessed, and recovery can be initiated without a separate show-cause notice.
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