TaxTMI 
TaxTMI 
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?
Interest on wrong ITC
08 Apr 2022 
5 Replies 
2660 Views Asked by
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. (AI Summary)
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. (AI Summary)