Reversal of ITC

[Bibhu Tripathy]

Dear experts,

From a real estate company Department sent a summons and asked some documents during Feb.19

The company had obtained completion certificate during May 2017 and accumulated ITC in the credit ledgers during 2017 -18 and 2018-19. After receipt of summons the company reversed the ITC IN financial documents. The credit could not be reversed in GSTR 3B due to non filing of return due to technical problems.

Department searched the premises during Aug, 19 and after seven days the return was filed and the credit was reversed from the accumulated ITC.

Department asking for interest on the ground that amendment in Sec. 50 does not apply to Rule 42 and the net cash liability concept is not applicable. Also they ask for penalty.

Is the Department correct in the said stand

AI Summary

Real estate firm disputes tax interest on unutilized ITC; experts debate applicability of Sections 50, 73, and 74 of CGST Act. A real estate company received a summons from the tax department regarding accumulated Input Tax Credit (ITC) for 2017-18 and 2018-19. The company reversed the ITC in financial documents but faced technical issues filing the reversal in GSTR-3B. The department demanded interest and penalties, arguing that amendments in Section 50 do not apply to Rule 42, and the net cash liability concept is inapplicable. Experts in the forum debated whether interest is due on unutilized ITC, referencing Sections 73 and 74 of the CGST Act. Opinions varied on whether interest should apply, with some suggesting waiting for a show cause notice.