Section 21

Where an ISD distributes excess ITC in contravention of section 20 to one or more recipients of credit,

excess ITC so distributed shall be recovered from such recipients + interest, and

provisions of section 73 or 74, shall, mutatis mutandis, apply for determination of amount to be recovered.

Excess credit distributed by ISD can be recovered along with interest only from the recipient and not from ISD.

Circular No. 71/45/2018-GST dt. 26-10-2018

SN-3

Issue

Representations have been received regarding the manner of recovery of excess credit distributed by an Input Service Distributor (ISD) in contravention of the provisions contained in section 20 of the CGST Act.

Clarification

1. Provision of Section 20 were given.

2. The recipient unit(s) who have received excess credit from ISD may deposit the said excess amount voluntarily along with interest if any by using GST DRC-03.

3. If the said recipient unit(s) does not come forward voluntarily, necessary proceedings may be initiated against the said unit(s) u/s 73 or 74. GST DRC-07 can be used by the tax authorities in such cases.

4. It is further clarified that the ISD would also be liable to a general penalty under the provisions contained in section 122(1)(ix) of the CGST Act.