ITC availability on tax component paid under section 73

[Ramanathan Seshan]

Dear Experts,

I am reaching out to seek your guidance regarding the Input Tax Credit (ITC) on the tax component paid under section 73. Specifically, I would like to understand whether it is permissible to avail of ITC of the tax component when payment is made through DRC-03 or DRC-07 ? If it can be availed what is the time limit of utilizing so?

Upon perusal of Rule 36(4), I did not find any explicit restrictions concerning this matter, which raises my query further.

Regards,

S Ram

[KASTURI SETHI]

 (i) There is no time limit to utilise ITC. Restriction is imposed on availing ITC as per Section 16 (4). 

(ii) See Section 17 (5) (i). ITC is not blocked for Section 73. It is blocked for any order passed under Section 74, 129 & 130.

[Ramanathan Seshan]

Dear Sethi-sir,

Thanks for your swift response. Does it mean that tax component of the demand raised u/s Section 73 for FY 19-20 cannot be availed for the current year owing to restriction in Sec 16(4).

In case, it can be utilized, can we avail in the next month 3B set off ?

Regards,

S Ram

[Shilpi Jain]

Tax paid u/s 73 is not a blocked credit u/s 17(5).

Need further facts on your query. Are you paying this tax under RCM?

[Ramanathan Seshan]

Dear Shilpi mam,

Thanks for your swift response. 

The DRC-07 (Section 73) order is for the FY 20-21 which was issued in Feb 2025.

Regards,

S Ram

[Shilpi Jain]

If its your output tax liability that you are paying u/s 73 then where isthe question of taking credit?

[Ramanathan Seshan]

Dear Shilpi-mam,

In case of short payment ? 

Regards,

S ram

AI Summary

Input tax credit on tax paid under section 73 is available, subject to Section 16(4) restrictions and not time-barred. Tax paid under section 73 is not identified as a blocked credit under section 17(5) and Rule 36(4) contains no explicit bar; entitlement to claim ITC remains subject to the eligibility and restriction conditions in section 16(4). Payments that discharge an output tax liability do not create ITC, and factual distinctions (such as short payment or reverse charge treatment) determine whether credit can be availed; there is no separate temporal restriction on utilising such ITC apart from statutory eligibility rules.