TaxTMI 
TaxTMI 
Interest on early availment of ITC
X X X X Extracts X X X X
X X X X Extracts X X X X
....nterest on early availment of ITC <br> Query (Issue) Started By: - Deepak Kumar Dated:- 7-5-2026 Goods and Services Tax - GST <br> Got 13 Replies <br> GST<br> <br> 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? --Reply By: Shilpi Jain The Reply: Ideally you should not be liable to interest but the law does not have express provisio....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ns in this regard. So you would get a notice if dept identifies this which you would have to defend. --Reply By: Shilpi Jain The Reply: In many cases the litigation costs are higher than amount ofinterest. So wait and watch if dept initiates anything on this --Reply By: YAGAY andSUN The Reply: 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....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 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 Court and the corresponding legislative framework, interest liability under Section 50 is....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 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 o....
X X X X Extracts X X X X
X X X X Extracts X X X X
....f 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. --Reply By: KASTURI SETHI The Reply: In this scenario, interest is not payable. The buyer cannot be penalized due to the supplier's fault. --- Sub-Reply By: KASTURI SETHI The Sub-Reply: The following case law can be helpful :- "Purchasing dealer cannot be punished, if selling dealer failed to deposit tax"-----Gauhati High Court in the case of National Plasto Moulding reported as 2024 (8) TMI-836 Gauhati High Court. --Reply By: Sadanand Bulbule The Reply: Where the ITC was bona fide availed on a genuine March-2024 invoice upo....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n 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. --Reply By: FCA Adv amit aggarwal The Reply: Hon'ble supreme court Suncraft Energy Ltd 2023 (12) TMI 739 - SC Order- purchaser can't de denied to avail ITC. no penal action can be taken against buyer hon'ble allahabad high court in case of M/s R.T. Infotech (2025 (6) TMI 116 - ALLAHABAD HIGH COURT) and landmark judgement in case of Hon'ble madras D.Y. Beathel Enterprises 2021 (3) TMI 1020 - MADRAS HIGH....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... COURT- clarified that deptt first initiate action against supplier, ITC should be available to purchaser. --Reply By: Deepak Kumar The Reply: Thank you all for your replies. I also feel that if the department would have booked that case between March and may, high chancea were there for tax demands.. One more thing.. Demanding interesr from both the taxpayer quoted by Pinnacle Tax Advisor, won't it be unjust unrecichment for the government --- Sub-Reply By: KASTURI SETHI The Sub-Reply: Mature of offence committed by the buyer and the seller are entirely different. Both are independent proceedings. No issue of excess collection of interest by the department. No unjust enrichment. In order to get fair justice, you will have to fight....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... the case by taking shelter of the above case laws. How the case laws can be useful to you, you will have to study wide and study deep. Not cake walk.. --- Sub-Reply By: KASTURI SETHI The Sub-Reply: You should not be concerned with the action taken against the supplier by the department. You are to defend your case yourself. --- Sub-Reply By: KASTURI SETHI The Sub-Reply: Facts of each case are NOT always the same. --Reply By: Raam Srinivasan Swaminathan Kalpathi The Reply: 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 enou....
X X X X Extracts X X X X
X X X X Extracts X X X X
....gh 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 --Reply By: Pinnacle Tax Advisor The Reply: 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, y....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ou 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. <br>***<br> Discussion Forum - Knowledge Sharing....