The Madras High Court has ruled that interest under section 50(3) of the GST Act is liable to be paid where a taxpayer has incorrectly claimed and used Input tax credit, even if the dispute emerges from a mismatch between GSTR-3B and GSTR-2A returns.
The Court set aside the writ petition of Jayashree Enterprises, keeping the tax department’s order imposing interest on the disputed ITC.
The applicant contested an assessment order dated February 12, 2025, mainly disputing the charge of interest. It said that the discrepancy between ITC shown in GSTR-3B form and the auto-populated GSTR-2A return could not be considered as “wrongful availment and utilisation” of ITC.
The taxpayer placed reliance on the proviso to Section 50(1), claiming that interest must apply only to the portion of tax paid through the electronic cash ledger and not where liability was released using the electronic credit ledger.
The State tax authorities countered the appeal by referring to Section 50(3) of the GST Act read with Rule 88B(3). They said that the law regulates matters that have incorrectly claimed and used ITC and mandates interest from the date of wrongful usage until the credit is reversed.
Justice Senthilkumar Ramamoorthy stated that Section 50(1) deals with late payment of tax, and Section 50(3) is a provision that is applicable to matters related to incorrect availment and usage of ITC.
The Court observed that the GST law does not express “wrongful availment and utilisation.” Hence, any ITC claimed and used without legal entitlement, irrespective of fraudulent intent, would come under the scope of Section 50(3).
The Court then said that allegations which include fraud or bad faith are separately addressed under Section 74 of the GST law and thus could be read into Section 50(3). It analysed Rule 88B(3), which specified the manner of computing incorrectly claimed and used GST input tax credit (ITC) as per the electronic credit ledger balance and the utilisation date.
The HC discovered that the assessing officer had accurately applied Section 50(3) after recording that the taxpayer had used ITC before it was legitimately available.
The Court said that the charge of interest was legally justified. Therefore, the writ petition was dismissed, reaffirming that taxpayers could not bypass interest liability only due to the dispute arising from a GSTR-3B and GSTR-2A mismatch when the ITC had been incorrectly claimed and used.
| Case Title | Jayashree Enterprises Vs Assistant Commissioner (ST) |
| Case No. | WP No. 19835 of 2026 |
| For Petitioner | Mr J. Madhusuthanan |
| For Respondent | Ms Amirta Poonkodi Dinakaran |
| Madras High Court | Read Order |
