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CA Final · Indirect Tax Laws · Demands and Recovery

Shivalik Services, an Input Service Distributor, distributed credit in contravention of the prescribed distribution provisions, resulting in excess credit going to two recipient units. How is the excess credit recovered under section 21 of the CGST Act?

The excess credit is recovered from the recipients of the credit, along with interest. The determination follows section 73 or section 74 or section 74A, as the case may be, applied mutatis mutandis. It is not recovered from the distributor alone or interest-free.

  1. AOnly from the ISD, since it made the distribution
  2. BRecovered from the recipients along with interest, using section 73 or 74 or 74A as applicable, mutatis mutandis, to determine the amountCorrect
  3. CAutomatically reversed by the common portal without any notice
  4. DRecovered from the recipients without interest, using only section 73

Explanation

Section 21 provides that excess credit distributed is recovered from the recipients along with interest. The provisions of section 73 or section 74 or section 74A, as the case may be, apply mutatis mutandis to determine the amount. Recovery from the ISD alone and recovery without interest are not what the section says.

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