Interest on wrong ITC

[Kaustubh Karandikar]

XYZ had wrongly claimed ITC which they have reversed but without paying interest since in totality large amount of ITC is in balance to cover the ITC claimed. However, e.g. if ITC of CGST is wrongly claimed, in CGST sufficient balance is not available but is available in SGST and IGST to cover the wrong ITC. Are they required to pay interest in such situation for ITC on CGST?

[Shilpi Jain]

No interest would be liable. the ITC balance is due to the manner in which the credit has to be utilised as per law. Mere fact that there is ITC balance, in whichever head, should be enough not to charge interest

There is a HC decision also in this regard

[Kaustubh Karandikar]

Thanks shilpi ji for you support. Is it possible to share the HC ruling or at least the citation?

[Shilpi Jain]

M/S RADHESHYAM SPINNING PVT LTD VERSUS UNION OF INDIA [2021 (2) TMI 141 - GUJARAT HIGH COURT]

[Kaustubh Karandikar]

thanks shilpi ji for the citation.

[Ganeshan Kalyani]

Thank you Shilpi Mam.

AI Summary

Input tax credit interest not payable where aggregate ITC suffices despite head-wise shortfall, supported by cited ruling. No interest is payable where a wrongly claimed input tax credit in one tax head is reversed but the taxpayer has sufficient aggregate ITC across other heads to cover the wrongful claim; allocation and utilisation rules explain head-wise shortfalls and a cited judicial precedent (M/S Radheshyam Spinning Pvt Ltd v Union of India) supports the position that aggregate sufficiency negates separate interest liability.