WRONG AVAILMENT OF ITC

[ROHIT GOEL]

One of our client is engaged in export of services and is 100% EOU. Suppose unit has ₹ 100 as ITC and ₹ 18 as RCM Input however unit has wrongly availed input tax credit of ₹ 118 and RCM of ₹ 18 in GSTR-3B resulting into excess input of ₹ 18.

That the unit had applied for refund for such higher amount wherein AO has deducted ₹ 18 which was wrongly availed by unit in GSTR-3B as such effect of wrong availment got rectified. Later on AO has re-credited the amount of ₹ 18 to electronic credit ledger of unit and now during audit we are filing DRC-03 for ₹ 18 which was wrongly availed.

Now question is whether we have to pay interest on such amount as the amount of ₹ 18 was never utilised by unit and balance in electronic credit ledger was always more than ₹ 18.

[Ganeshan Kalyani]

How can you justify the tax was not utlised. It is a difficult task. Interest may be applicable for the time period during which you took credit and reversed by your own. However, department may demand interest from the date the credit was credited into your ECL to till the date of payment. If you came to know about the tax being recredited to your account that would have been the correct time to reverse the same.

AI Summary

Wrongful Input Tax Credit Availment may attract interest from crediting to payment unless promptly reversed upon discovery.
The taxpayer wrongly availed combined input tax credit and RCM, later had the excess adjusted in refund proceedings and re credited to its electronic credit ledger, and now intends to remit the amount via DRC 03. Interest may be chargeable from the time the credit was availed until reversal or payment, and the department may claim interest from the date the amount was credited into the electronic credit ledger until payment; the correct practice is to reverse wrongly availed credit promptly upon discovery.