Page 14 - Ch9_POT & TDS-TCS

June 50,000 3,00,000 - 3,50,000 3,30,000 20 July 20 July
July 20,000 6,00,000 - 6,20,000 6,10,000 20 Aug 18 Aug

Aug 10,000 5,00,000 - 5,10,000 5,10,000 20 Sep 25 Sep
Determine the date from when interest is applicable in above cases & also calculate the amount of
interest if wrongly availed and utilized ITC is reversed in the September return i.e. 20 October 20XX
Answer :-

Calculation of amount on which interest is payable under rule 88B
Month Opening balance in Eligible ITC Total ITC Output Closing balance in Amount on
electronic credit ITC (B) wrongly (D) = liability E-credit ledger (F) which Interest
ledger [A] availed (C) (A+B+C) (E) = (D-E) is applicable

April - 7,00,000 50,000 7,50,000 7,00,000 50,000 -
May 50,000 5,00,000 - 5,50,000 5,00,000 50,000 -
June 50,000 3,00,000 - 3,50,000 3,30,000 20,000 30,000
July 20,000 6,00,000 - 6,20,000 6,10,000 10,000 10,000

Aug 10,000 5,00,000 - 5,10,000 5,10,000 - 10,000
Notes:
1) Date of filing the return is the date of utilization of ITC.
2) Interest is calculated period starting from the date of utilisation of such wrongly availed ITC till the date

of reversal of such credit or payment of tax in respect of such amount.
3) Calculation of Interest under section 50 read with Rule 88B:
April & May:
ITC of ₹ 50,000 was wrongly availed but the same was not utilised, so interest is not applicable.

June:
Ü Wrongly availed ITC of ₹ 50,000 is carried forward to the June month, however ₹ 30,000 is utilised out of ₹
50,000 when we had shortage of eligible ITC (₹ 30,000) to adjust against the output liability of ₹ 3,30,000
Ü Thus, Interest shall be applicable on ₹ 30,000 as the same is utilised by filing the return of June month i.e.

from 20th July 20XX.
Ü Calculation of Interest:
Amount of wrongly utilized ITC: ₹ 30,000
Rate of Interest - 18 % p.a
Date of utilization of ITC – 20th July 20XX

Date of Reversal of ITC – 20th October 20XX
Interest = ₹ 30,000 * 18% *93 days/ 365 days = ₹ 1376
July:

Ü Out of ₹ 50,000, ₹ 30,000 was already utilised and the balance of ₹ 20,000 was carried forward to the July
month. Since eligible ITC (₹ 6,00,000) is lesser than the output liability of ₹ 6,10,000/- and the
remaining wrongly availed ITC of ₹ 10,000 is utilised,
Ü Therefore, interest shall be applicable on ₹ 10,000 from the date of filling the return i.e. 18th August 20XX.
Ü Calculation of Interest:

Amount of wrongly utilized ITC: ₹ 10,000
Rate of Interest - 18% p.a
Date of utilization of ITC – 18th Aug 20XX

Date of Reversal of ITC – 20th October 20XX
Interest = ₹ 10,000 * 18% *64 days/ 365 days = ₹ 316

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