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Interest on ITC Reversals under GST

After the recommendations of 45th GST Council Meeting, there has been some clarity about interest on ITC reversals. It says

In the spirit of earlier Council decision that interest is to be charged only in respect of net cash liability, section 50(3) of the CGST Act to be amended retrospectively, w.e.f. 01.07.2017, to provide that interest is to be paid by a taxpayer on “ineligible ITC availed and utilized” and not on “ineligible ITC availed”. It has also been decided that interest in such cases should be charged on ineligible ITC availed and utilized at 18% w.e.f. 01.07.2017.

Relevant Section: Section 50 of CGST Act 2017
Relevant Notification: To be released as per the recommendations of 45th GST Council Meeting.

So, interest on ITC reversals will now be calculated:

  • on ineligible ITC availed and utilized
  • at 18% rate of interest as per section 50(3) (to be amended retrospectively, w.e.f. 01.07.2017)

📝Note: If ineligible ITC is availed but not utilized then interest cannot be demanded for ITC reversals.

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