Interest on early availment of ITC

[Deepak Kumar]

Hi

I have availed the ITC for March -24 invoice in March -24 only. However my supplier has filed GSTR-1 of march-24 in may-24 and GSTR-3B in Aug-24.

Whether any interest liability will be there for me as per Sec. 50(3) for early availment of ITC?

Because my supplier has paid the dues to government belatedely.

I can understand that interest liability should be demanded from my supplier on his delayed declaration of outward supplies but should I be punished?

[Sadanand Bulbule]

Where the ITC was bona fide availed on a genuine March-2024 invoice upon receipt of goods/services, mere belated filing of GSTR-1 and GSTR-3B by the supplier would at best attract interest liability upon the supplier under Section 50(1), but cannot automatically fasten interest liability upon the recipient under Section 50(3) in the absence of fraud, suppression or collusion.

Thus your understanding is right.

[Raam Srinivasan Swaminathan Kalpathi]

Dear Querist

Your supplier should have remitted interest u/s. 50 for belated remittance and upload of GST Returns. The recipient need not remit interest on this score. Rule 36(4) only mandates availing of ITC based on its reflection in GSTR-2B. There are enough case laws supporting the recipient's stand like Sahil Enterprises, Malaya Rub-Tech Industries, etc. The recipient cannot be faulted for dereliction by the supplier. Thanks

[YAGAY andSUN]

As per the provisions of Section 16(2)(c) of the CGST Act, input tax credit ("ITC") is admissible to the recipient only when the tax charged in respect of the supply has actually been paid to the Government by the supplier. However, the recipient ordinarily has no real-time mechanism to independently verify the actual discharge of tax liability by the supplier beyond the statutory compliances reflected in the GST portal.

In the present case, the ITC pertaining to March 2024 was availed by you in March 2024 itself, whereas the supplier reported the outward supply in GSTR-1 only in May 2024 and discharged the corresponding tax liability through GSTR-3B in August 2024. The delay in reporting and payment is attributable entirely to the supplier.

Section 50(3) of the CGST Act provides for interest only where ITC has been “wrongly availed and utilised.” Mere availment of ITC does not trigger interest unless such credit is both ineligible and utilised. Further, post the amendment made pursuant to the decision in the case of Union of India v. VKC Footsteps India Pvt. Ltd. - 2021 (9) TMI 626 - Supreme Courtand the corresponding legislative framework, interest liability under Section 50 is linked with wrongful availment coupled with utilisation.

In your case, the credit was availed on the strength of a valid tax invoice and the underlying supply was genuine. The subsequent delayed compliance by the supplier cannot automatically render the ITC "fraudulently availed" or "wrongly availed" in the hands of the recipient, particularly in absence of any collusion, suppression, or mala fide intent attributable to you.

Judicial precedents have consistently held that a bona fide recipient should not be penalised for supplier defaults where the recipient has fulfilled all conditions within his control. Accordingly, the primary exposure to interest and penal consequences should lie upon the supplier who delayed declaration and payment of output tax.

Therefore, in the facts stated, a sustainable demand of interest under Section 50(3) against you does not appear legally tenable merely because the supplier discharged tax belatedly.

[Pinnacle Tax Advisor]

Since you did not satisfy the conditions of Section 16 of the CGST Act in March 2024 but still availed ITC, such availment will be treated as excess credit. When your supplier filed GSTR 3B in August 2024, the conditions under Section 16 were met, and you became eligible to claim ITC. Accordingly, you are liable to pay interest for the period from March 2024 to August 2024.

Your supplier, on the other hand, is liable for interest and late fees due to delayed payment of tax and late filing of the return. At the same time, you are independently liable to pay interest on the excess ITC availed. The fact that interest has been recovered from the supplier for late payment does not entitle you to claim ITC in March 2024 without fulfilling the requirements of Section 16.

AI Summary

Input tax credit timing under GST is disputed where supplier delay raises questions on recipient interest liability and excess credit. Early availment of GST input tax credit is discussed in a case where the recipient claimed ITC in March 2024, but the supplier filed GSTR-1 later and paid tax only in August 2024. One view says interest under Section 50(3) does not arise against the recipient unless the credit is wrongly availed and utilised, and that the supplier should bear the consequences of delayed reporting and payment. Another view says the recipient availed excess credit before the conditions of Section 16 were met and is liable to interest for the intervening period.