Interest on reversal of ITC,if set off from cash ledger

This discussion clarifies whether interest is payable when Input Tax Credit (ITC) is reversed and subsequently set off against the cash ledger. The consensus is that interest is indeed payable. It is calculated from the date the original liability was incurred until the ITC reversal is effectively set off using funds from the cash ledger. You should verify the exact date of utilisation and ensure sufficient balance was available in your cash or credit ledger to cover the liability.