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Interest on ITC Credit Claimed Twice against the RCM paid : Excess RCM claimed
Relevant provisions under the GST Act. : Interest on ITC wrongly availed and utilized.
- As per substituted subsection 50 (3) of the act, interest is applicable only where ITC is wrongly availed and utilized. In order to attract interest u/s 50(3) of the act both components of wrong availment and utilization must be present. Where ITC is claimed wrongly in the return but lying in the electronic credit ledger as it as without utilization, interest will not be payable.
- Interest should be calculated as per the manner prescribed in rule 88B. Accordingly, an interest shall be calculated on the amount of input tax credit wrongly availed and utilized for the period starting from the date of utilization of such wrongly availed input tax credit till the date of reversal of such credit or payment of tax in respect of such amount, at such rate as may be notified under said sub-section (3) of section 50.
Facts of the Case: Interest on ITC Credit Claimed Twice against the RCM paid
After thoroughly investigating the matter, the GST taxpayer recognized the error and subsequently rectified the same through the submission of DRC 03 and the balance amount was reversed in GSTR3B of October 2023, and the input tax credit (ITC) was reconciled against the RCM.
Further, a year-wise summary and reconciliation of the GST Electronic Credit Ledger and Cash Ledger made to the GTO clearly evidenced the instances of short payment of Goods and Service Tax Liability along with the overdue period, which is very negligible in value as well as overdue period; moreover, calculating interest on that value for that overdue period is very difficult. Further, the GST taxpayer informed us that the above-said summary & reconciliation of the Electronic Credit and Cash Ledger clearly showed the average closing balance of GST input is quite high as compared to the default amount and period. A year-wise summary and reconciliation of GST Electronic Credit Ledger and Cash Ledger is enclosed hereunder for GST office's kind perusal.
All the GST taxpayers should consider the importance of compliance with GST regulations, & steps have to be taken to prevent such errors in the future. The taxpayer apologizes for any inconvenience caused and appreciates the department's support in resolving this matter promptly. The taxpayer should humbly request GTO to waive the interest on outstanding balance for the overdue period, if any.
Furthermore, few judgments are pronounced by the Hon’ble court, which are clearly mentioning that the interest is not leviable on ITC which is availed but not utilized for payment of tax, e.g.
- The Hon’ble Patna High Court it was held, in the case of M/S Commercial Steel Engineering Corporation Vs State of Bihar, that interest is not leviable on ITC which is availed but not utilized for payment of tax
- The Punjab & Haryana High Court had addressed the issue in its decision in Ind-Swift Laboratories Ltd. Vs Union of India [2009-240-ELT-328 (P&H)], wherein it was held that no interest was payable if the CENVAT Credit is merely availed and not utilised for payment of tax
- Punjab and Haryana High Court, again in CCE vs. Maruti Udyog Ltd. [2007 (214) ELT 173 (P&H)], held that an assessee was not liable to pay interest where credits had only been availed erroneously but were not subsequently utilized.
- Further, on the basis of the above-stated discussion, the GST taxpayer should requesting to officer, for not levying the interest and penalty on account of the wrongly claimed GST credit, whereas the GST was availed but not utilized for payment of tax; therefore, the GST officer is requested to consider the same while calculating the interest on the delay in payment of tax, if any.
Finally, the GST tax office will make their judgment on the excess RCM claimed: ITC was Claimed Twice against the RCM paid
