Penalty on wrongly availed ITC

[Rajesh Kumar]

Sir/Madam

Section 50(3) has been amended as interest is payble only on the Wrongly availed and utilised ITC.

I want to know that if anyone availed ITC and not utilised the same. Is he liable for penalty under section 73 and 74. As there is still a word ' avail or utilise'.

How can we defend to waive off penalty ?

If anyone has not filed GSTR 9 , however, due date has been gone, Can he take benefit to waive penalty under Section 73 instead of section 74?

Should department charge penalty u/s 73 instead of section 74 till not filed GSTR 9?

Regards

[Shilpi Jain]

General penalty of Rs. 25k each under CGST & SGST Act may be levied by the department.

[Shilpi Jain]

The penalty is not a voluntary penalty and in case the asseessee ascertains himself the excess availment of credit and reverses it on his own motion, no penalty should be leviable.

Section 73 and 74 do not provide for waiver of penalty. Non-filing of GSTR-9 within time will attract late fees.

[Shilpi Jain]

Have a look at the decision of the Madras HC in the case of Aathi Hotel 2022 (1) TMI 1213 - MADRAS HIGH COURT where a penalty of 10k was levied...

In my post where I mentioned penalty of 25k, read it as UPTO 25k

[Amit Agrawal]

Dear Queries,

It seems to me that your queries here are already partly replied in issue id - 118009.

As issues raised are question of facts and law, it is better to raise them in continuation of earlier queries and not just starting new issue. This will help for you (by getting better answers) and people taking time to answer the queries (by knowing entire factual background).

[Amit Agrawal]

Please read as 'Dear Querist' in above post.

[Amit Agrawal]

Now, in the context of factual background of your earlier query covered in Issue ID - 118009, please let me try to answer questions raised by you here:

Question No. 1: Section 50(3) has been amended as interest is payble only on the Wrongly availed and utilised ITC.

Answer: Due to reasons explained in the relevant post/s in issue id - 118009, you are correct in above observations.

Question No. 2: I want to know that if anyone availed ITC and not utilised the same. Is he liable for penalty under section 73 and 74. As there is still a word " avail or utilise".

Answer: Due to reasons explained in the relevant post/s in issue id - 118009, one is liable for penal action either u/s 73 or 74 (depending upon other surrounding facts) against ineligible ITC availed EVEN IF same is not utilized.

Question No. 3: How can we defend to waive off penalty ?

Answer: Considering the entire background of facts as covered in issue id - 118009 and limitation to discuss intricacies of factual issues over forum etc., I would suggest you to take a consultation from a good professional to see if you have got a decent case (if any) to defend or not.

Question No. 4: If anyone has not filed GSTR-9 , however, due date has been gone, Can he take benefit to waive penalty under Section 73 instead of section 74?

Answer: Levy of penalty u/s 73 or 74 has no direct relation with the fact that whether GSTR-9 was filed or not. However, the fact of non-filing of GSTR-9 (presumably, when required) - in itself - cannot be used by you to avoid penalty u/s 74. Actually, if you try this argument, this fact will be used against you by Dept. Penalty u/s 74 can be avoided only if you can prove that ingredients to levy penalty under that section does not exist in a given situation.

Question No. 5: Should department charge penalty u/s 73 instead of section 74 till not filed GSTR 9?

Answer: There is no such obligation cast upon Dept. under law.

These are strictly personal views of mine and the same should not be construed as professional advice / suggestion.

[ravi verma]

Sir/Madam

Changes in section 50 of the Central Goods and Services Tax Act, for sub-section (3) have not yet been notified so I believe the old provisions will be applicable.

regards

[Amit Agrawal]

One of the recommendation of 47th GST Council meeting is 'retrospective amendment in section 50(3) of CGST Act, with effect from 01.07.2017,to provide that interest will be payable on the wrongly availed ITC only when the same is utilized' is to be notified by Central Government at the earliest.

Once notified, this amendment will be retrospective w.e.f. 01.07.2017 and old provisions will not be applicable.

[Amit Agrawal]

Just an update on my last post above:

The CBIC vide Notification No. 9/2022- Central Tax dated July 05, 2022 notified amendment made in Section 49(10) and Section 50(3) and Section of the CGST Act vide Finance Act, 2022..

With this, amendment u/s 50 (3) is made retrospective w.e.f. 01.07.2017 and old provisions are no longer applicable.

AI Summary

Interest on wrongly availed input tax credit now limited to instances where the credit is utilised, altering exposure to assessments. Amendment to Section 50(3) makes interest payable only where wrongly availed input tax credit is utilised, with retrospective effect from 01.07.2017 via Notification No. 9/2022. Penal liability for ineligible ITC remains governed by separate assessment provisions and may be invoked even if the credit was not utilised; non-filing of annual reconciliation return does not by itself avoid penalty and attracts late fees.