M/s Nose Ltd. reduced the amount of ₹2,25,000 from the output tax liability in contravention of the provisions of section 42(10) of the CGST Act, 2017 in the month of January 2018 (vide invoice dated 12th January, 2018),

CS Professional · Advanced Tax Laws and Practice · PYQS · December 2018
M/s Nose Ltd. reduced the amount of ₹2,25,000 from the output tax liability in contravention of the provisions of section 42(10) of the CGST Act, 2017 in the month of January 2018 (vide invoice dated 12th January, 2018), which is ineligible credit at invoice level. As a result a show cause notice was issued by the Central Tax Department under section 74 of the CGST Act, 2017 along with interest. M/s Nose Ltd. paid the tax and interest on 5th March, 2018. Find the interest liability if any? Ignore penalty.

Answer & Explanation:

As per section 42(10) read with section 50(3) of CGST Act, 2017 amount reduced from the output tax liability in contravention of the provisions of section 42(7) shall be added to the output tax liability of the recipient in his return for the month in which such contravention takes place and such recipient shall be liable to pay interest on the amount so added at the rate specified in the section 50(3) of CGST Act, 2017. Therefore, applicable interest rate shall be 24% per annum. January month return due date is 20th of February, 2018. Interest = ₹1,923 (₹2,25,000 x 24% x 13/365) From 21st February 2018 to 5th March 2018 = 13 days

Topics: Central Goods and Services Tax Act, 2017

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