Interest on wrong ITC

[Kaustubh Karandikar]

XYZ had wrongly availed credit of IGST. The same was reversed but without paying interest since, even though there was no ITC balance in IGST account to cover the wrongly availed ITC, there was sufficient balance in CGST + SGST to cover the same. Is the GST audit team right in demanding interest since no balance in IGST even though sufficient balance in CGST + SGST? Any possible defence?

AI Summary

Debate on Interest Payable for Wrongly Availed IGST Credit with Sufficient CGST/SGST Balance; GST Rules Examined A discussion on a forum addressed whether interest is payable on wrongly availed input tax credit (ITC) of IGST by a company, despite having sufficient balance in CGST and SGST accounts. The GST audit team demanded interest, arguing that the IGST balance was insufficient. One participant argued that interest is due when the electronic credit ledger balance falls below the wrongly availed ITC amount. Another disagreed, citing that the law does not require separate calculations for different tax heads, suggesting no interest is payable. The discussion included references to GST rules, potential defenses, and recent GST Council recommendations.