Interest on ITC reversal Pursuant to Notification

[Kalpesh Shah]

Respected Seniors & Experts,

Facts of the Case :

One of my client is builder/Developer.

He has taken ITC of GST on Inputs and added it to ECL.

Now Client has opted for payment of GST under New Scheme i.e. 1%/5% without ITC as per Notification No. 3/2019 dated 29-3-2019. (Selection of new scheme or continuing with Old scheme was optional)

By following that notification, my client had Reversed ITC appearing in the ECL as well as paid additional amount in Cash within the date prescribed in the notification.

His Case was taken up for GST Desk Audit. During audit Proceedings Officer is asking for Interest on ITC Reversal on amount appearing in ECL as well as Cash paid amount.

Querry :

1. Can officer ask for interest on ITC reversal as appearing in ECL pursuant to notification ?

2. Can officer ask for Interest on Amount paid in cash, which is also pursuant to notification ?

Pls guide.

Thank you

[Ganeshan Kalyani]

In my view, interest is not payable.

[Shilpi Jain]

In case the reversal is being done as per the provisions of Annexure I & II to the Rate notification, within the time limit specified in that notification/Annexure, no interest would be liable.

"...before the due date for furnishing of the return for the month of September following the end of financial year 2018-19, in the following manner:"

This is the due date as per the said notification

[Amit Agrawal]

I agree with my fellow colleagues.

What I want to know is the 'legal basis / reasoning' of Dept. to raise such types of demand?

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

[Kalpesh Shah]

Respected Seniors & Experts,

Thank you for your Valuable input.

AI Summary

Interest on ITC reversal: no interest if reversal and payment comply with the notification's procedure and timeline.
If a taxpayer reversed ITC and paid the additional cash amount in accordance with Notification No. 3/2019 and its Annexures within the prescribed time limit (the due date for furnishing the return for the month of September following the end of the financial year 2018-19), interest is not payable; therefore interest demands raised during a GST desk audit are not warranted where the reversal and payment complied with the notification's procedure and timeline.