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CA Final · Indirect Tax Laws · Payment of Tax

Ganga Metals Ltd wrongly availed ITC of Rs 2,00,000 on 5 June. Its electronic credit ledger balance was Rs 3,50,000 including this amount. On 18 June it debited Rs 2,40,000 from the ledger for a purpose other than return payment, leaving a balance of Rs 1,10,000. Under Rule 88B(3) and its Explanation, what is the extent and date of utilisation of the wrongly availed ITC?

Rs 90,000 is utilised on 18 June. Wrongly availed ITC is treated as utilised only when the ledger balance falls below it, and only by the extent of the shortfall, Rs 2,00,000 less Rs 1,10,000. Because the debit was not a return payment, the debit date applies.

  1. ARs 2,00,000 utilised on 5 June, the date of availment
  2. BRs 90,000 utilised on 18 June, the date of debitCorrect
  3. CRs 2,40,000 utilised on 18 June, the date of debit
  4. DRs 90,000 utilised on 5 June, the date of availment

Explanation

Utilisation occurs when the ledger balance falls below the wrongly availed ITC of Rs 2,00,000, and the extent is the shortfall. The balance fell to Rs 1,10,000, so the extent is 2,00,000 - 1,10,000 = Rs 90,000. As it is not a payment through the return, the date is the date of debit, 18 June. Availment alone is not utilisation.

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