Interest liability on ITC reversal due to credit note

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....nterest liability on ITC reversal due to credit note<br> Query (Issue) Started By: - Aap Consulting Pvt. Ltd. Dated:- 15-9-2025 Last Reply Date:- 16-9-2025 Goods and Services Tax - GST<br>Got 3 Replies<br>GST<br>Dear Experts, Please guide.&nbsp; Invoice received in - Nov 2021 ITC availed and utilized in - Dec 2021 Credit note issued by supplier in Feb 2022 ITC reversed in Dec 2022 We have al....

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....ready paid interest from Feb 22 to Dec 22; however, the department is seeking interest from date of availment and utilization of ITC ie. Dec 21 As per my understanding, the ITC became reversible only after issuance of credit note, hence no interest liability for the period prior to issuance on Credit Note. Also technically the entire tax was deposited in governments account in Dec 21 only and th....

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....e supplier reduced the tax liability (pertaining to credit note amount) only in Feb 22. Reply By Sadanand Bulbule: The Reply: Reversal obligation arises&nbsp;only after&nbsp;supplier issues a credit note (Feb 2022).&nbsp; Hence, interest liability (u/s 50) can only be computed from Feb 2022 until actual reversal in Dec 2022. You have already discharged this interest; no further liability arises.....

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.... Reliance can be placed on Supreme Court judgment in Ecom Gill Coffee Trading (2023 (3) TMI 533 - Supreme Court) and CBIC Circular 137/07/2020-GST clarifying that interest is on "wrongly availed and utilized ITC," not otherwise. Your treatment, paying interest from December 2022 is correct. Departments demand from December 2021 is not sustainable. You can respond accordingly. Reply By KASTURI S....

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....ETHI: The Reply: Dear Querist, You are on right track. There is no legal force in the contention of the department. Reply By Shilpi Jain: The Reply: Also, it is a settled principle that interest is only a compensation for any loss that has occurred to the exchequer. Pratibha processors decision of the Supreme Court can be relied in this case and no further interest should become liable assumin....

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....g the supplier had paid the taxes. What was the reason for the credit note though? Could add some more reasons for taking the above stand.<br> Discussion Forum - Knowledge Sharing ....