Important Keyword: Circular No. 192/04/2023-GST, Section 50(3) CGST Act, Wrongly Availed IGST Credit, Interest on Wrong ITC, Rule 88B CGST Rules, IGST Credit Reversal, Electronic Credit Ledger, GST Interest Calculation, Interest on ITC Reversal, Combined ITC Balance, Compensation Cess Credit, CBIC Circular 192/04/2023, GST Interest under Section 50, GST Compliance,
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File No. CBIC-20001/5/2023-GST
Government of India
Ministry of Finance
Department of Revenue
Central Board of Indirect Taxes & Customs
GST Policy Wing
*****
New Delhi, Dated the 17th July, 2023
Circular No. 192/04/2023 - GST: Clarification on Charging of Interest Under Section 50(3) of the CGST Act, 2017, in Cases of Wrong Availment of IGST Credit and Reversal Thereof.
To,
The Principal Chief Commissioners/ Chief Commissioners/ Principal Commissioners/ Commissioners of Central Tax (All)
The Principal Directors General/ Directors General (All)
Madam/Sir,
Subject: Clarification on charging of interest under section 50(3) of the CGST 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 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 IGST credit by a registered person and reversal thereof, for the calculation of interest under rule 88B of CGST Rules, whether the balance of input tax credit available in electronic credit ledger under the head of IGST only needs to be considered or total input tax credit available in electronic credit ledger, under the heads of IGST, CGST and SGST taken together, has to be considered. | Since the amount of input tax credit available in electronic credit ledger, under any of the heads of IGST, CGST or SGST, can be utilized for payment of liability of IGST, it is the total input tax credit available in electronic credit ledger, under the heads of IGST, CGST and SGST taken together, that has to be considered for calculation of interest under rule 88B of CGST Rules and for determining as to whether the balance in the electronic credit ledger has fallen below 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 Rule. |
| 2. | Whether the credit of compensation cess available in electronic credit ledger shall 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. | As per proviso to section 11 of Goods and Services Tax (Compensation to States) Act, 2017, input tax credit in respect of compensation cess on supply of goods and services leviable under section 8 of the said Act can be utilised only towards payment of compensation cess leviable on supply of goods and services. Thus, credit of compensation cess 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.
(Sanjay Mangal)
Principal Commissioner (GST)
📚 Frequently Asked Questions (FAQs): Circular No. 192/04/2023 - GST
Q1. What is Circular No. 192/04/2023-GST?
Answer:
Circular No. 192/04/2023-GST clarifies when interest under Section 50(3) of the CGST Act is payable if a taxpayer wrongly avails IGST Input Tax Credit (ITC) and later reverses it. The circular explains how Rule 88B of the CGST Rules should be applied and whether interest is calculated by considering only the IGST balance or the total ITC available in the Electronic Credit Ledger.
Q2. Why was this circular issued?
Answer:
The circular was issued because taxpayers and field officers had different interpretations regarding the calculation of interest on wrongly availed IGST credit. The key question was whether interest should arise merely because the IGST balance became insufficient, even when sufficient CGST and SGST credits were available.
In simple terms, the CBIC clarified that the combined ITC balance should be considered instead of looking only at the IGST ledger.
Q3. Is interest payable merely because IGST credit was wrongly availed?
Answer:
Not always. Wrong availment of IGST credit alone does not automatically attract interest under Section 50(3).
Many businesses actually face this issue. Interest becomes payable only if the wrongly availed credit is considered to have been utilized under Rule 88B. If sufficient eligible ITC remained available throughout the relevant period, interest may not be payable.
Q4. Should only the IGST balance be considered while calculating interest?
Answer:
No. The circular clearly states that the total Input Tax Credit available under the heads of IGST, CGST, and SGST combined must be considered.
If you look at it practically, since IGST liability can be discharged using credit available under multiple tax heads, the law does not require officers to examine only the IGST balance while determining interest liability.
Q5. When will no interest be payable under Section 50(3)?
Answer:
No interest will be payable if, from the date of wrongful availment until the date of reversal, the combined balance of ITC under IGST, CGST, and SGST never falls below the amount of wrongly availed IGST credit.
Even if the IGST balance alone becomes lower than the wrongly availed amount, no interest will arise as long as the total Electronic Credit Ledger balance remains sufficient.
Q6. When does interest become payable?
Answer:
Interest becomes payable when the combined balance of IGST, CGST, and SGST credits falls below the amount of wrongly availed IGST credit.
Let’s understand this with an example. Suppose a taxpayer wrongly avails ₹5 lakh of IGST credit. If the combined Electronic Credit Ledger balance reduces to ₹4 lakh before reversal, ₹1 lakh is considered utilized, and interest under Section 50(3) will apply only on that utilized portion.
Q7. How is the amount considered as "utilized" determined?
Answer:
The utilized amount is not the entire wrongly availed credit. Instead, it is limited to the extent by which the combined Electronic Credit Ledger balance falls below the wrongly availed IGST credit.
This clarification is important because it prevents taxpayers from paying interest on the entire wrong credit when only a portion is effectively treated as utilized under Rule 88B.
Q8. Is Compensation Cess credit considered while calculating interest?
Answer:
No. Credit relating to GST Compensation Cess is excluded while calculating the balance of the Electronic Credit Ledger for interest purposes.
The circular explains that compensation cess credit can only be used for payment of compensation cess and cannot be utilized towards CGST, SGST, or IGST liabilities. Therefore, it is ignored while computing interest under Rule 88B.
Q9. Which legal provisions are referred to in this circular?
Answer:
The circular mainly refers to Section 50(3) of the CGST Act, Rule 88B(3) of the CGST Rules, Section 20 of the IGST Act, and the provisions relating to utilization of compensation cess under the Goods and Services Tax (Compensation to States) Act, 2017.
Together, these provisions determine whether wrongly availed IGST credit has actually been utilized and whether interest is payable.
Q10. Does this circular change the law on interest?
Answer:
No. Circular No. 192/04/2023-GST is clarificatory in nature.
It does not amend Section 50(3) or Rule 88B. Instead, it explains the correct methodology for calculating interest where wrongly availed IGST credit is subsequently reversed, thereby ensuring uniform implementation across GST authorities.
Related Resource:
GST Compliance: https://finodha.in/gst-compliance/
Download PDF: Circular No. 192/04/2023 - GST
More Information: https://taxinformation.cbic.gov.in/
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mmon portal website: https://www.gst.gov.in/