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CA Final · Indirect Tax Laws · Payment of Tax

Vihaan Metals availed wrongly Rs 3,00,000 of ITC. Later, the electronic credit ledger balance fell to Rs 1,00,000 because of payment of tax through the monthly return, which was due on 20th of the month but filed on 25th. Under Rule 88B(3) Explanation, what is the extent and date of utilisation of the wrongly availed ITC? (Assume the balance just before the payment was above Rs 3,00,000.)

Rs 2,00,000 is utilised on the 20th. Utilisation equals the amount by which the credit ledger balance falls below the wrongly availed ITC, which is Rs 3,00,000 less Rs 1,00,000. For payment through the return, the date is the earlier of due date and filing date.

  1. ARs 2,00,000 utilised, on 20th, the due dateCorrect
  2. BRs 3,00,000 utilised, on 25th, the filing date
  3. CRs 1,00,000 utilised, on 20th, the due date
  4. DRs 2,00,000 utilised, on 25th, the filing date

Explanation

Utilisation is the amount by which the balance falls below the wrongly availed ITC: 3,00,000 - 1,00,000 = Rs 2,00,000. Where the fall results from payment of tax through the return, the date is the due date or actual filing date, whichever is earlier, so 20th. Choosing the filing date ignores the earlier-of test.

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