interest on wrongly availed ITC

[AMIT BATHAM]

Respected learned expert, suppose Mr. XYZ wrongly utilize ITC in the year 2017-2018, but his credit ledger never fell below the amount utilized during the relevant year, i.e. 2017-2018, then my first question is whether interest will be charged if ITC is reversed in the year 2021-2022.

Second as per explanation given in rule 88 b input tax credit wrongly availed shall be construed to have been utilised

1. the date of utilisation of such input tax credit shall be taken to be, -

a. the date, on which the return is due to be furnished under section 39 or the actual date of filing of the said return, whichever is earlier, if the balance in the electronic credit ledger falls below the amount of input tax credit wrongly availed, on account of payment of tax through the said return; or

b. the date of debit in the electronic credit ledger when the balance in the electronic credit ledger falls below amount of input tax credit wrongly availed, in all other cases

• According to my understanding, ITC qualifies as wrongly used from the day its credit ledger balance falls below that amount, and if it does not fall below that amount in that year, no interest is charged because it is not considered wrongfully utilized in that year. Please shed some insight on whether I am accurate or not.

AI Summary

Interest Not Charged on Wrongly Availed ITC if Balance Remains Above Amount Until Reversal, Per Rule 88B An individual inquired about the applicability of interest on wrongly availed Input Tax Credit (ITC) under the Goods and Services Tax (GST) framework, specifically when the credit ledger balance never fell below the wrongly availed amount from 2017-2018 until its reversal in 2021-2022. Two experts responded, clarifying that if the ITC balance did not fall below the wrongly availed amount until the reversal, interest would not be charged. According to Rule 88B, ITC is considered utilized only when the balance falls below the availed amount; therefore, no interest applies if this condition is unmet.