ITC not reversed as per Rue 42 and also not utilised that portion of credit.

[Dinesh Kirubhakaran]

Good Moring All,

Issue:

ITC not reversed as per Rue 42 and also not utilised that portion of credit.

Opinion required:

Whether interest under section 50(1) or 50(3) is applicable ?

Extract of rule 42, where through the above question arises

[Except in case of supply of services covered by clause (b) of paragraph 5 of the Schedule II of the Act, the input tax credit] determined under sub-rule (1) shall be calculated finally for the financial year before the due date for furnishing of the return for the month of September following the end of the financial year to which such credit relates, in the manner specified in the said sub-rule and-

(a) where the aggregate of the amounts calculated finally in respect of ‘D₁’ and ‘D₂’ exceeds the aggregate of the amounts determined under sub-rule (1) in respect of ‘D₁’ and ‘D₂’, such excess shall be ¹⁰[reversed by the registered person in FORM GSTR-3Bor through FORM GST DRC-03] in the month not later than the month of September following the end of the financial year to which such credit relates and the said person shall be liable to pay interest on the said excess amount at the rate specified in sub-section (1) of section 50 for the period starting from the first day of April of the succeeding financial year till the date of payment; or

Thanks in advance.

AI Summary

Debate on GST Act: No Interest for Unused ITC Under Rule 42; 24% Interest If Utilized; Potential Penalties. A discussion on a forum addresses whether interest is applicable under sections 50(1) or 50(3) of the GST Act when Input Tax Credit (ITC) is not reversed under Rule 42 but also not utilized. Participants agree that if ITC is not utilized, there is no revenue loss, and thus no interest or penalty should apply. However, if ITC is used, interest may be charged at 24% per annum. Some contributors highlight that Rule 42's wording suggests interest accrues from April 1, regardless of utilization. Others caution that non-reversal could lead to penalties under sections 73 or 74 if detected by authorities.