Circular No. 192/04/2023-GST [C10-6HP]

References have been received from trade requesting for clarification regarding charging of interest under sub-section (3) of section 50 of the Central Goods and Services Tax Act, 2017 (hereinafter referred to as the “CGST Act”) in the cases where IGST credit has been wrongly availed by a registered person. Clarification is being sought as to whether such wrongly availed IGST credit would be considered to have been utilized for the purpose of charging of interest under sub-section (3) of section 50 of CGST Act, read with rule 88B of Central Goods and Services Tax Rules, 2017 (hereinafter referred to as the “CGST Rules”), in cases where though the available balance of IGST credit in the electronic credit ledger of the said registered person falls below the amount of such wrongly availed IGST credit, the total balance of input tax credit in the electronic credit ledger of the registered person under the heads of IGST, CGST and SGST taken together remains more than such wrongly availed IGST credit, at all times, till the time of reversal of the said wrongly availed IGST credit.

2. Issue has been examined and to ensure uniformity in the implementation of the provisions of law across the field formations, the Board, in exercise of its powers conferred by section 168 (1) of the CGST Act, hereby clarifies the issues as under:

S. No. Issue Clarification

1. In the cases of wrong availment of Since the amount of input tax credit available IGST credit by a registered person and in electronic credit ledger, under any of the reversal thereof, for the calculation of heads of IGST, CGST or SGST, can be

interest under rule 88B of CGST utilized for payment of liability of IGST, it is Rules, whether the balance of input tax the total input tax credit available in credit available in electronic credit electronic credit ledger, under the heads of ledger under the head of IGST only IGST, CGST and SGST taken together, that needs to be considered or total input has to be considered for calculation of tax credit available in electronic credit interest under rule 88B of CGST Rules and ledger, under the heads of IGST, for determining as to whether the balance in CGST and SGST taken together, has the electronic credit ledger has fallen below to be considered. the amount of wrongly availed input tax credit of IGST, and to what extent the balance in electronic credit ledger has fallen below the said amount of wrongly availed credit.

Thus, in the cases where IGST credit has been wrongly availed and subsequently reversed on a certain date, there will not be any interest liability under sub-section (3) of section 50 of CGST Act if, during the time period starting from such availment and up to such reversal, the balance of input tax credit (ITC) in the electronic credit ledger, under the heads of IGST, CGST and SGST taken together, has never fallen below the amount of such wrongly availed ITC, even if available balance of IGST credit in electronic credit ledger individually falls below the amount of such wrongly availed IGST credit. However, when the balance of ITC, under the heads of IGST, CGST and SGST of electronic credit ledger taken together, falls below such wrongly availed amount of IGST credit, then it will amount to the utilization of such wrongly availed IGST credit and the extent of utilization will be the extent to which the total balance in electronic credit ledger under heads of IGST, CGST and SGST taken together falls below such amount of wrongly availed IGST credit, and will attract interest as per sub-section (3) of section 50 of CGST Act, read with section 20 of Integrated Goods and Services Tax Act, 2017 and sub-rule (3) of rule 88B of CGST

Rules.

2. Whether the credit of compensation As per proviso to section 11 of Goods and cess available in electronic credit ledger Services Tax (Compensation to States) Act, shall be taken into account while 2017, input tax credit in respect considering the balance of electronic of compensation cess on supply of goods and credit ledger for the purpose of services leviable under section 8 of the said calculation of interest under sub-rule Act can be utilised only towards payment of (3) of rule 88B of CGST Rules in compensation cess leviable on supply of goods respect of wrongly availed and utilized and services. Thus, credit of compensation cess IGST, CGST or SGST credit. cannot be utilized for payment of any tax under CGST or SGST or IGST heads and/ or reversals of credit under the said heads.

Accordingly, credit of compensation cess available in electronic credit ledger cannot be taken into account while considering the balance of electronic credit ledger for the purpose of calculation of interest under sub- rule (3) of rule 88B of CGST Rules in respect of wrongly availed and utilized IGST, CGST or SGST credit.

3. It is requested that suitable trade notices may be issued to publicize the contents of this Circular.

4. Difficulty, if any, in implementation of this Circular may please be brought to the notice of the Board. Hindi version would follow.