Summary
CBIC Clarification on Interest on Wrongly Availed IGST ITC
The Central Board of Indirect Taxes and Customs (CBIC), through Circular No. 192/04/2023-GST dated 17 July 2023, clarified the calculation of interest under Section 50(3) of the CGST Act, 2017, where IGST input tax credit (ITC) has been wrongly availed and subsequently reversed.
Key Clarifications
1. Combined ITC balance must be considered
For determining whether wrongly availed IGST ITC has been utilised, the combined balance of IGST, CGST and SGST credit in the electronic credit ledger must be considered, rather than the IGST balance alone.
2. When is interest not payable?
If the combined IGST, CGST and SGST credit balance never falls below the amount of wrongly availed IGST ITC between the date of availment and reversal, interest under Section 50(3) is not payable on this basis, even if the individual IGST credit balance falls below that amount.
3. When can interest apply?
If the combined balance falls below the amount of wrongly availed IGST ITC, the shortfall is treated as the extent of utilisation for the purpose of the clarification. Interest may apply to that extent in accordance with the applicable provisions.
4. Compensation Cess ITC is excluded
Compensation Cess credit cannot be included in the combined balance for this calculation because it cannot be utilised to pay IGST, CGST or SGST liabilities.
Practical Implication
Taxpayers facing an interest demand involving wrongly availed IGST ITC should review their electronic credit ledger balances for the period between availment and reversal. The relevant dates, ledger records and interest calculation should be examined before determining the amount, if any, payable.
Official Reference
CBIC Circular No. 192/04/2023-GST dated 17 July 2023.
Disclaimer: This article is for general informational purposes only. The applicability of the clarification depends on the facts and records of the individual case.
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