Interest on reversal of ITC when ITC balance available

In my view, interest is payable only to the extent the wrongly availed ITC was actually utilised.

As per Section 50(3) of the CGST Act read with Rule 88B, interest applies on ITC wrongly availed and utilised, and the period starts from the date of utilisation of such wrong ITC till the date of reversal/payment.

Therefore, you should prepare a month-wise Electronic Credit Ledger working from 2019 till the date of reversal. If the available eligible ITC balance was always equal to or more than ₹15,000, then interest should not be payable because the disputed ITC was never actually utilised. If the balance fell short during any period, interest should be calculated only for that shortfall period and only on the shortfall amount.

The officer’s view of charging interest continuously up to 2026 merely because the ITC ledger was later utilised may not be correct, especially if fresh eligible ITC was available and sufficient balance existed subsequently.

You should submit a detailed ledger reconciliation along with DRC-03 working and rely on Section 50(3), Rule 88B, and CBIC Circular