ITC Reversal

[Ethirajan Parthasarathy]

Trader A's GSTR 2A reflects ITC of ₹ 1,00,000- for April20, out of which he utilizes ₹ 18,000/- towards output tax for April. Let us assume that there are no purchases or sales for next 6 months.

One of the vendors to Trader “A” has not been paid for more than 180 days and the ITC reported by such vendor is ₹ 20,000/-

Now trader has to reverse the ITC availed to the extent of ₹ 20,000/-. Since there is sufficient ITC available, the trader has to only reverse the ITC, to bring down the ITC in Electronic Credit Ledger to ₹ 62,000/- (100000 - 18000 - 20000)

My question is whether Trader 'A' is still liable for interest on reversal of ITC. If yes, is it on 18,000/- or 20,000/-

AI Summary

Interest Payable on ITC Reversal: Consensus Reached on 20,000 Amount for Unpaid Vendor Over 180 Days Trader A's GSTR 2A shows an Input Tax Credit (ITC) of 1,00,000 for April 2020, with 18,000 utilized for output tax. With no transactions for six months, a vendor remains unpaid for over 180 days, necessitating a reversal of 20,000 ITC. This adjustment reduces the Electronic Credit Ledger balance to 62,000. The query concerns whether interest is payable on the ITC reversal and if so, whether it applies to 18,000 or 20,000. Both respondents agree that interest should be paid on the 20,000 reversal.