XYZ had wrongly claimed ITC which they have reversed but without paying interest since in totality large amount of ITC is in balance to cover the ITC claimed. However, e.g. if ITC of CGST is wrongly claimed, in CGST sufficient balance is not available but is available in SGST and IGST to cover the wrong ITC. Are they required to pay interest in such situation for ITC on CGST?
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Interest on wrong ITC
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Quick Summary
Yes interest has to paid on the wrongly availed and utilised CGST credit because there is no such excess credit available in the CGST ledger,
Interest on wrongly claimed ITC is 18% p.a. and Interest on wrongly claimed as well as utilized ITC is 24% p.a.
It is advised to save yourself from future litigation pay the interest amount as per the above provided applicable rates however, the interest liabilty has been freezed till the day you reversed the ITC so even on a litigation you will have to pay the same amount of interest. Further if you resort to not paying such interest additional general penalty may also be levied by officer for not complying with the provisions of the Act hence please pay the same do avoid a general penalty of INR 25000 subject to change as per the mood of officer
It is advised to save yourself from future litigation pay the interest amount as per the above provided applicable rates however, the interest liabilty has been freezed till the day you reversed the ITC so even on a litigation you will have to pay the same amount of interest. Further if you resort to not paying such interest additional general penalty may also be levied by officer for not complying with the provisions of the Act hence please pay the same do avoid a general penalty of INR 25000 subject to change as per the mood of officer
Interest on wrongly claimed ITC is 18% p.a. and Interest on wrongly claimed as well as utilized ITC is 24% p.a.
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