GST Interest & Penalty Not Applicable on Reversed ITC Never Availed or Utilised from Date of Claim of ITC in ECRL: Madras HC

The Madras High Court has ruled that GST interest and penalty are not applicable on Input Tax Credit (ITC) that was reversed but never actually availed or utilized from the date of its claim in the Electronic Credit Ledger (ECRL). The court reasoned that since the ITC was merely claimed but not used to offset any output tax liability, there was no actual loss to the revenue that would warrant the imposition of interest or penalty. This decision provides relief to taxpayers who might have inadvertently claimed ineligible ITC but promptly reversed it without utilizing it. It emphasizes that the levy of interest and penalty should be linked to the actual utilization of wrongly claimed ITC, resulting in a financial loss to the exchequer.