demand paid by debiting credit ledger- what about interest, Goods and Services Tax - GST

[giri gattupalli]

respected sir,

demand order in Form DRC -07 was issued on my client amounting to Rs 10,00,000 for fy 2020-21. and tax liability shown in notice is genuine and my client ready to pay off the liability by debiting his electronic credit ledger. and the proper officer also agreed to do so.

there was credit laying in my client' s input tax credit ledger continuously right from fy 2020-21. and no cash component was used to pay tax liability. in this scenario whether there is liability to pay interest or not. please discuss

thanking you

Posts / Replies

[Amit Agrawal]

Kindly refer to discussion under Issue-ID: 118576 bearing subject-line as 'Interest on wrong ITC'.

[KASTURI SETHI]

DRC-07 is an order to pay tax either under Section 73 or 74 of the CGST Act. It is a fact that your client has not deposited tax on his own (voluntarily). If Section 73 or 74 of the CGST Act is invoked for recovery, interest will have to be paid. No benefit of ITC having sufficient balance in Electronic Credit Ledger, is available as per proviso to Section 50 of the CGST Act.

[Padmanathan Kollengode]

What is the demand relating to?

Is it short payment of OPT?

is it excess ITC availment?

[Rajagopalan Ranganathan]

Sir,

Interest and penalty is always payable in cash only. You cannot discharge interest and penalty by debiting the credit ledger. If you take an ineligible ITC which is not utilised for payment of tax then while reversing the ineligible credit you need not pay interest while reversing the ineligible credit provided there is sufficient balance in your credit ledger for making the reversal.