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All QuestionsCategory: GST ConsultancyRegarding Interest on the reversal of unutilized ITC.
Profile photo of CA Piyush KapoorCA Piyush Kapoor asked 1 year ago

Regarding Interest on the reversal of unutilized ITC.

The assessee is the Manufacturer of Bread which is exempted under GST but ingredient purchases in Bread are taxable and the Assessee has shown input GST in GSTR 3B. During the period Assessee has taken order of Biscuit in which the same ingredient used. On output supply, Assessee has utilized some input on Biscuits. Rest unutilized GST keep in Credit ledger. Now the department asks for a reversal of ineligible GST and imposes interest on it.
Kindly suggest.

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Profile photo of Consultease AdministratorConsultease Administrator replied 1 year ago

There is no levy of interest on ITC reversed. The procedure explained in Act for levy of interest is not yet notified by the department.

Profile photo of CA Piyush KapoorCA Piyush Kapoor replied 1 year ago

BUT DEPARTMENT IMPOSING INTEREST UNDER FOLLOWING CLAUSE IN RULE 42

(2) 9 [ Except in case of supply of services covered by clause (b) of paragraph 5 of the Schedule II of the Act, the input tax credit ] determined under sub-rule (1) shall be calculated finally for the financial year before the due date for furnishing of the return for the month of September following the end of the financial year to which such credit relates, in the manner specified in the said sub-rule and-

(a)where the aggregate of the amounts calculated finally in respect of ‘D1’ and ‘D2’ exceeds the aggregate of the amounts determined under sub-rule (1) in respect of ‘D1’ and ‘D2’, such excess shall be 10 [ reversed by the registered person in FORM GSTR-3B or through FORM GST DRC-03 ] in the month not later than the month of September following the end of the financial year to which such credit relates and the said person shall be liable to pay interest on the said excess amount at the rate specified in sub-section (1) of section 50 for the period starting from the first day of April of the succeeding financial year till the date of payment; or

(b) where the aggregate of the amounts determined under sub-rule (1) in respect of ‘D1’ and ‘D2’ exceeds the aggregate of the amounts calculated finally in respect of ‘D1’ and ‘D2’, such excess amount shall be claimed as credit by the registered person in his return for a month not later than the month of September following the end of the financial year to which such credit relates.