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CA Final · Indirect Tax Laws · Demands and Recovery

Tara Distributors, an Input Service Distributor, distributed credit in contravention of section 20 and so excess credit went 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 who received it, along with interest. Section 73 or section 74 (or 74A), as the case may be, applies mutatis mutandis to determine the amount recoverable.

  1. AFrom Tara Distributors alone, without interest
  2. BFrom the recipients along with interest, with sections 73 or 74 (or 74A) applying mutatis mutandis to determine the amountCorrect
  3. CFrom the recipients without interest, under a summary order
  4. DOnly by reversal by the Input Service Distributor in its next return

Explanation

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

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