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

Input tax credit reversal triggers interest liability on the unpaid supplier credit amount when reversal is required.
Trader A must reverse from the Electronic Credit Ledger the portion of Input Tax Credit (Rs. 20,000) attributable to a vendor unpaid beyond 180 days; interest is payable on that reversed amount, not on the portion already utilized towards output tax.