Claiming GST paid as expense and reversing the same from e credit ledger

[Kanishk Manglik]

Respected faculty,

Company have a supply of goods which falls under inverted duty structure. The GST paid on purchase has been taken as an expense in profit & loss a/c. It now have to reverse the GST from the credit ledger of the amount that has been taken as expense. Will the company now have to pay interest on the said reversal @ 24%. The interest provision applies when one takes input that is ineligible and then reverse it. In the company's case the GST was eligible but it is reversing it by choice as it had claimed it as expense. Will it still be liable for interest.

Thank You

AI Summary

Interest on reversed input tax credit arises only if reversal reduces output tax liability or causes revenue shortfall.
If input tax credit is reversed before any utilisation and there is no short payment of output tax, interest does not arise because output tax liability has not been reduced and no loss to the revenue has occurred; validly availed credit need not be reversed from the electronic credit ledger merely due to accounting as an expense.