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Interest on wrongly claimed ITC

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vikram kerekar

918 Points Posted on 20 June 2022

Dear Team,

Is Interest payable on ITC reversed due to wrongful claim in GST-3B even when balance in Credit Ledger is unutilized?
Is there any circular regarding the same?

Please help

Replies (2)

Quick Summary

This discussion clarifies whether interest is payable on Input Tax Credit (ITC) that was wrongly claimed and subsequently reversed in GST-3B, particularly when the credit ledger still holds an unutilised balance. While a Madras High Court decision and a retrospective amendment to Section 50(3) of the Finance Bill 2022 suggest interest may be applicable for wrongly *utilised* ITC, it appears no interest is due if the ITC remains unutilised.

CA. ANKIT PANDYA

292 Points Posted on 20 June 2022

Refer Madras High Court decision in Aathi Hotel v. Assistant Commissioner, 2022-VIL-72-MAD.

There is a retrospective amendment in finance bill 2022 for section 50(3)

Finance Bill, 2022 has proposed to substitute new sub-section 50(3) retrospectively, with effect from the 1st July, 2017, so as to provide for levy of interest on input tax credit wrongly availed and utilized, and to provide for prescribing manner of calculation of interest in such cases

Refer Clause 110 in Finance Bill 2022