TaxTMI 
TaxTMI 
If I have balance in E Cash ledger and at the time of audit found that taken some wrong ITC then any interest or panelty liablity on reversal inder Section 73, 74 or 50.
M Kumar
Interest and panelty on reversal of ITC
01 Aug 2023 
9 Replies 
25795 Views Asked by
Interest on wrongly availed ITC applies from utilisation until reversal; early self-reversal can limit penalty exposure.
Interest is payable on wrongly availed and utilised input tax credit, calculated on the amount so utilised from the date of utilisation until reversal or tax payment, with rule guidance that ITC is deemed utilised when electronic credit ledger falls below the wrongly availed amount. Self-initiated reversal and payment of interest before commencement of departmental proceedings can avoid penalty and limit liability, whereas reversal after initiation of proceedings or after notice leads to interest on the gross availed amount and attracts higher penalties. Voluntary payment via DRC-03 allows pre-notice or within-30-day intimation and updates electronic ledgers upon filing. (AI Summary)
Interest is payable on wrongly availed and utilised input tax credit, calculated on the amount so utilised from the date of utilisation until reversal or tax payment, with rule guidance that ITC is deemed utilised when electronic credit ledger falls below the wrongly availed amount. Self-initiated reversal and payment of interest before commencement of departmental proceedings can avoid penalty and limit liability, whereas reversal after initiation of proceedings or after notice leads to interest on the gross availed amount and attracts higher penalties. Voluntary payment via DRC-03 allows pre-notice or within-30-day intimation and updates electronic ledgers upon filing. (AI Summary)