Subject: Clarification on charging of interest under section 50(3) of the KGST Act, 2017, in cases of wrong availment of IGST credit and reversal thereof.
References have been received from trade requesting for clarification regarding charging of interest under sub-section (3) of section 50 of the Karnataka Goods and Services Tax Act, 2017 (hereinafter referred to as the "KGST 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 KGST Act, read with rule 88B of Karnataka Goods and Services Tax Rules, 2017 (hereinafter referred to as the "KGST 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 KGST 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 KGST Act, hereby clarifies the issues as under:
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 subsection (3) of section 50 of KGST 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 KGST 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 KGST 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 KGST taken together falls below such amount of wrongly availed IGST credit, and will attract interest as per sub-section (3) of section 50 of KGST Act, read with section 20 of Integrated Goods and Services Tax Act, 2017 and sub-rule (3) of rule 88B of KGST Rules.
3. Difficulties, if any. in implementation of this circular may be brought to the notice of this office.
(C SHIKHA)
Commissioner of Commercial Taxes
(Karnataka) Bengaluru