TaxTMI 
TaxTMI 
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?
Interest on wrong ITC
08 Jun 2023 
14 Replies 
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Interest on wrongly availed input tax credit may be calculated using the aggregate electronic credit ledger, affecting interest liability.
Interest is payable on wrongly availed and utilised input tax credit from the date of utilisation until reversal or payment; utilisation is deemed when the electronic credit ledger balance falls below the wrongly availed amount and is measured by that shortfall. A key dispute is whether this assessment is head-specific (IGST, CGST, SGST/UTGST separately) or whether the aggregate balance across all ledger heads must be considered; recent guidance and GST Council recommendations favour aggregate consideration. (AI Summary)
Interest is payable on wrongly availed and utilised input tax credit from the date of utilisation until reversal or payment; utilisation is deemed when the electronic credit ledger balance falls below the wrongly availed amount and is measured by that shortfall. A key dispute is whether this assessment is head-specific (IGST, CGST, SGST/UTGST separately) or whether the aggregate balance across all ledger heads must be considered; recent guidance and GST Council recommendations favour aggregate consideration. (AI Summary)