The Tax Publishers


Interest, Penalties and Prosecution Vis-a-vis Input Tax Credit

CA. S.D. Purohit

The present article seeks to make an overview of the provisions relating to charge of interest, imposition of penalty and initiation of prosecution in respect of wrong taking and utilization of the input tax credit under the goods and services tax law.

1. Interest for undue or excess claim of ITC or reduction of output tax liability

As per sub-section (3) of section 50 of the CGST Act, a taxable person who makes an undue or excess claim of input tax credit under sub-section (10) of section 42 or undue or excess reduction in output tax liability under sub-section (10) of section 43, shall pay interest on such undue or excess claim or on such undue or excess reduction, as the case may be, at such rate not exceeding twenty-four per cent., as may be notified by the Government on the recommendations of the Council.

As per Notification No. 13/2017-Central Tax, dt. 28-6-2017 and Notification No. 6/2017-Integrated Tax, dt. 28-6-2017, interest for undue and excess claim of ITC or undue or excess reduction of input tax credit is chargeable at the rate of 24% p.a.

2. Undue or excess claim of ITC under section 42(10)

Section 42 of the Act pertains 'matching, reversal and reclaim of input tax credit'. As per sub-section (1) of section 42 of the Act, the details of every inward supply furnished by a registered person (i.e., recipient) for a tax period shall, in such manner and within such time as may be prescribed, be matched --

(a) with the corresponding details of outward supply furnished by the corresponding registered person (hereafter in this section referred to as the supplier) in his valid return for the same tax period or any preceding tax period;

(b) with the integrated goods and services tax paid under section 3 of the Customs Tariff Act, 1975 (51 of 1975) in respect of goods imported by him; and