Calculation under Rule 42

[Rajesh Kumar]

Sir/madam,

A transporter is supplying taxable as well as exempted supplies and also reversing ITC in monthly 3B returns as per the ration of exempted and taxable supplies for the month. In a whole year, party has reversed Rs. 8 lakh. Now department has taken up the issue and calculation done on yearly basis, they directed the party to pay Rs. 52 lacs more. The method of calculation is same, the difference is monthly and yearly. Rule 42 also says to calculate at the end of year.

Please guide how the interest will be calculated. Total 60 lakh to be paid . In some months ITC availed only Rs. 1 lakh but in some months it is about Rs. 20 lakh.

can we take average amount 60/11=5 lakh per month for interest calculation?

or interest and penalty can be avoided ?

AI Summary

Transporter Faces Rs. 60 Lakh ITC Demand: Monthly vs. Annual Interest Debate and Penalty Dispute Under Rule 42, Section 74 A transporter dealing in both taxable and exempt supplies has been reversing Input Tax Credit (ITC) monthly based on the ratio of supplies. Over a year, they reversed Rs. 8 lakh, but the tax department recalculated annually, demanding an additional Rs. 52 lakh, totaling Rs. 60 lakh. The discussion centers on whether interest should be calculated monthly or annually and if penalties can be avoided. Participants debate the application of Rule 42, annual reconciliation requirements, and possible penalties under Section 74 of the CGST Act, with differing views on whether penalties can be contested based on the timing and disclosure of reversals.