Skip to content

CA Final · Indirect Tax Laws · Demands and Recovery

An Input Service Distributor of Zenith Ltd. distributed credit in contravention of section 20, resulting in excess credit to two branch recipients. Under section 21 of the CGST Act, how is the excess recovered?

The excess credit is recovered from the recipients who received it, along with interest, and the determination of the amount follows section 73 or section 74 or section 74A as applicable, mutatis mutandis, as section 21 provides.

  1. AOnly from the Input Service Distributor, with no recovery from recipients
  2. BFrom the recipients of the excess credit along with interest, with section 73 or 74 or 74A applying as the case may be for determining the amountCorrect
  3. CFrom the recipients without interest, as interest applies only to the distributor
  4. DBy cancelling the registration of the recipients, with no determination of the amount

Explanation

Section 21 provides that excess credit distributed in contravention of section 20 is recovered from the recipients along with interest. Section 73 or section 74 or section 74A, as the case may be, applies mutatis mutandis to determine the amount. Recovery solely from the distributor or without interest is contrary to the text.

Did you get it right without looking?

One question tells you little. A timed set on Demands and Recovery shows your real accuracy, how long you take and where you lose marks.

Practise Demands and RecoveryFree diagnostic mock

More Demands and Recovery questions