In the GST law, input tax credit is available for tax paid on receipt of goods or services from tax levied on supply of goods or services or both. Input tax credit available is under IGST, CGST or SGST laws. As per the provision of section 88(a) the credit of CGST or SGST Act can be availed after offsetting the credit of IGST earlier against the tax liability under all the Acts. Section 49 provides for an order for utilization of input tax credit. As per this provision, the credit of IGST Act can be availed first against the tax liability of IGST Act and thereafter, if the credit increases, it can be availed first against the tax liability of CGST and then against the tax liability of SGST. The credit under the CGST Act should first be utilized against the tax liability under the CGST Act and then any remaining credit can be utilized against the liability under the IGST Act. The credit under the SGST Act can be utilized against the tax liability under the SGST Act and after such utilization if the credit is carried forward, the same can be utilized against the tax liability under the IGST Act.
CGST Act credit cannot be used against SGST Act liability and similarly SGST Act credit cannot be used against CGST Act liability. Section 50(3) provides that if any ITC is wrongly claimed and utilised, the registered person is liable to pay interest at a rate not exceeding 24% notified by the Government. The interest for wrongful utilization of credit under the IGST Act was imposed by the GST policy wing of the Central Board of Indirect Taxes and Customs. Circular No. 192/04/2023-GST issued on 17-7-2023. In today’s article, information about the legal provisions and this circular has been given. Section 50(3) provides that if any ITC is wrongly claimed and utilised, the registered person is liable to pay interest at a rate not exceeding 24% notified by the Government. The interest for wrongful utilization of credit under the IGST Act was imposed by the GST policy wing of the Central Board of Indirect Taxes and Customs. Circular No. 192/04/2023-GST issued on 17-7-2023. In today’s article, information about the legal provisions and this circular has been given. Section 50(3) provides that if any ITC is wrongly claimed and utilised, the registered person is liable to pay interest at a rate not exceeding 24% notified by the Government. Interest imposed for wrongful utilization of credit under the IGST Act by the GST policy wing of the Central Board of Indirect Taxes and Customs. Circular No. 192/04/2023-GST issued on 17-7-2023. Today’s article gives information about the legal provisions and this circular.
When is input tax credit misused?
Section 50 provides for levy of interest on wrongful utilization of input tax credit. For this, sub-rule 3 of rule 88B provides that the period for computing interest under section 50(3) shall be tolled for the period from the date on which the input tax credit has been unutilized to the date on which such unutilized credit is reversed or tax is paid. As per the Explanation given in this rule, input tax credit wrongly claimed shall be deemed to have been taken when the balance in the electronic credit ledger is less than the input tax credit wrongly taken. As per the explanation given for when input tax credit is availed, if the electronic credit ledger balance is less than the amount due to incorrect input tax credit availed by the declarant while paying tax, the date on which the return is due as per section 39 or the date on which the return is actually filed.
Clarification given regarding interest on wrongly taking credit of IGST
In cases where the credit under the IGST Act has been misused, a question was raised by the trading industry whether only the input tax credit under the IGST Act should be reflected in the electronic credit ledger or the credit under IGST should be taken into account along with the CGST and SGST Act. In this regard, it is clarified from the above circular by the Board that IGST to set off the tax liability under the IGST Act. Input tax credit of CGST as well as SGST Act can be availed. Considering this provision of the law, IGST in the electronic credit ledger. CGST and SGST would have to consider all input tax credits of all laws to decide whether the wrongly applied IGST credit was in excess of the electronic credit ledger balance? Thus if in a case credit has been wrongly availed under the IGST Act and subsequently claimed, but the amount of credit wrongly availed of in IGST is considered as credit of IGST along with credit under CGST and SGST Act, interest under section 50(3) shall not be charged. If the electronic credit ledger balance of input tax credit under the IGST, CGST and SGST Acts is less than the wrongly applied input tax credit under the IGST Act during the period in which the wrongly availed input tax credit is availed and the date on which it is reversed, interest under section 50(3) shall be levied.
Credit of Compensation Cess cannot be taken into account
As per section 11 of the Goods and Services Tax (Compensation to States) Act, 2017, input tax credit available under that Act can be utilized only for payment of compensation cess levied on supply of goods or services. Thus the credit of Compensation Cess cannot be used to set off tax liability under IGST, CGST or SGST laws. Considering this provision of the Act, it is clarified that in case of misuse of input tax credit of IGST, CGST or SGST Act, levy of interest on Compensation Cess credit cannot be considered.
