Question ID : 44470

Interest on wrong availment of ITC

Rule 37 of CGST Act talks about reversal of ITC in case of non payment of consideration within 180 days . In the said rule , sub rule (3) was omitted w,e,f 1st Oct 2022 vide NN 19/2022 . Department contention is that erstwhile sub rule (3) which says “ RP shall be liable to pay Interest u/s 50(1) starting from the availment of ITC ( not utilisation ) shall be applicable till 1st Oct 2022 as this rule has been omitted w,e,f 1st Oct 2022 . Interest u/s 50 (3) as amended retrospectively vide NN 09/2022 w,e,f 5th July 2017 where Interest has to be paid on ITC availed & utilised shall not be applicable in such cases . Your view on above ?

Amended Sec 50 has been provided in a way to categorise two scenarios, one where interest is to be paid on tax not discharged within due period say outward supply, rcm etc. Second, with respect to ITC. In ITC, now it has been clarified interest will arise only when ITC is wrongly availed and utilised. To cover the present case of non payment to vendor within 180 days for the period prior to 01 Oct 2022 in category one above seems to be irrational interpretational of law and a deliberate attempt to trigger sub-sec (1) of Sec 50 instead of Sub-sec (3) of sec 50. In my humble understanding, the contention of the department can be very well defended on the above lines as sub-sec (3) will only trigger as non compliance of condition of Rule 37 is wrong availment of ITC in itself.