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Demand on Audit

22 February 2023

We had surrendered our RC a year back and in that there was ITC available of more than 27k , the refund of which was not taken as per rule. Now we had received GST audit notice and in that some demand including interest of app 10k has been levied. Can we adjust the demand from ITC even after surrender of ITC and also inform whether the officer can levy interest etc if sufficient ITC is available.

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5 Replies

RAJA (accountant) (118 Points)
Replied 22 February 2023

Interest need to be paid by cash and any short payment of tax you can adjust with available input credit

Anoop srivastava (223 Points)
Replied 22 February 2023

Thanks but how department can calculate interest if sufficient ITC is available and demand can be adjusted fully from that

CA Sachin M Jain (CA | GST | Refunds | Advisory | Litigation) (1313 Points)
Replied 22 February 2023

1. Interest is always to be paid through E-Cash ledger, ITC balance cannot be used for payment of Interest

2. Interest can be levied for delayed reporting and payment of GST even when paid through ITC

3. You need to understand the nature of demand raised by the GST officers, only then you can decide applicability of Interest on delay payments

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Anoop srivastava (223 Points)
Replied 22 February 2023

Thanks. I believe even after surrendering RC we can adjust the demand with unutilised ITC except interest if any.

Pankaj Rawat (GST Practitioner) (55030 Points)
Replied 29 April 2023

Yes correct .
As per Section 49 of CGST Act , Interest, penalties need to be adjusted by Cash Ledger & any output liability can be adjusted against Credit ledger.