VIOLATION OF RULE 86B LIABLE FOR GENERAL PENALTY OR FURTHER PAY TAX BY CASH?

[BARUN MUKHERJEE]

Respected experts,

A taxpayer had inadvertently disbursed his tax liability by utilizing 100% ITC instead of utilizing of 99% ITC. Now this discrepancy has been identified by GST Dept. during Audit and demanded 1% tax liability by cash along with interest and penalty in compliance with Rule 86B. Now my question is that as the tax payer had already paid the tax by utilizing 100% ITC which was violation of Rule 86B, Dept. can demand further 1% tax by cash along with interest or impose only general penalty u/s 125?

AI Summary

Taxpayer faces penalty for using 100% input tax credit instead of 99% under Rule 86B GST regulations A taxpayer incorrectly used 100% input tax credit instead of the permitted 99% under Rule 86B, violating GST regulations. The department discovered this during audit and demanded 1% additional tax payment in cash plus interest and penalty. The query concerns whether the department can demand both the cash payment and impose general penalty under Section 125. One expert confirmed the department can demand the additional 1% tax with interest, suggesting adjustment in subsequent periods, while noting a High Court case questioning the rule's validity. Another expert confirmed the department has authority to demand both the cash payment and impose general penalty.