Interest under 50(1)

[Vasudev Mehta]

The assesse had output tax through credit ledger in 2017-18 on 03.01.2020 through DRC 03 during audit. The assesse had enough balance in the electronic credit ledger till that time. Whether interest under section 50(1) is applicable on the above transaction where there was enough balance in ecl?

[Amit Agrawal]

Where ITC is wrongly availed but not utilized, one can take benefit of Section 50 (3) of the CGST Act, 2017 read with rule 88B (3) of the CGST Act, 2017.

But, this benefit is not available where any output tax liability was not disclosed & paid while filing return for the month when such output liability arises. In other words, subsequent payment of output taxes upon Dept's audit objection, interest is payable u/s 50 (1) of the CGST Act, 2017 read with rule 88B (3) of the CGST Act, 2017 even when tax-payer is having constant ITC balance in his ledger for in-between period.

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

[KASTURI SETHI]

If the department directs to pay GST under Section 74 of CGST Act, interest will be payable.

[Amit Agrawal]

In my humble view, liability to pay interest u/s 50 (1) will be there even if Dept. issues SCN u/s 73.

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

[KASTURI SETHI]

Sh.Amit Agrawal Ji,

Sir, I agree with your reply at serial no.3 above and accordingly, I amend my reply at serial no.2.

AI Summary

Interest under section 50(1) applies where undisclosed output tax is later paid despite available ITC balance. Interest under section 50(1) applies where an output-tax liability that was not disclosed and paid in the return for the relevant period is later paid following audit or assessment, and the availability of an uninterrupted balance in the electronic credit ledger during the intervening period does not negate the interest obligation; a relief for wrongly availed but unutilized input tax credit may be available, but it is not available where output tax was not disclosed and subsequently paid.