Lapse of ITC under inverted duty structure for fabric companies

[Kanishk Manglik]

Hi, this is case is regarding entity dealing in fabric under inverted duty structure.

Background: Initially since July 2017 the accumulated ITC due to inverted duty structure in case of supply of fabrics was not allowed. However As per notification no 20/2018-Central tax (Rate) dated 26.7.2018 the Refund of such ITC was allowed from Aug 2018. This notification followed by circular no 56/30/2018-GST dated 24.08.2018 also talked about Lapse of the ITC which has been accumulated till 31.07.2018 in order to be eligible for refund from Aug 2018. This accumulated ITC up to 31.07.2018 was required to be lapsed in the 3B return of August 2018.

Query: Now in my case the ITC has not been reversed in the return of august for whatever reason. Now i want to comply with the notification and reverse the ITC. Whether i shall be liable to interest for not reversing the ITC timely. The ITC is in my credit ledger only and has not been utilized against discharging outward Liability.

AI Summary

Debate on GST Forum: Is Interest Payable for Non-Reversal of ITC in 2018? Section 54 CGST Act Disputed. A discussion on the Goods and Services Tax (GST) forum addresses the issue of accumulated Input Tax Credit (ITC) under the inverted duty structure for fabric companies. A participant seeks advice on whether interest is payable for not reversing ITC in August 2018, as required by a notification. Responses vary, with some suggesting no interest is due since the ITC wasn't utilized, while others cite legal challenges and court rulings, such as the Gujarat High Court's decision in Garden Silk Mills, which questioned the government's authority under section 54 of the CGST Act. The discussion highlights the complexity of compliance and the potential for legal challenges.