60 A client has received notice u/s 74 along with DRC-01 in feb'22 in which he has been demanded whole ITC available in Credit ledger. His registration was cancelled in dec 21 on account of wrongful availment of ITC of 516000 of FY 17-18 and 18-19 of one defaulting supplier. Now, how to calculate interest as per section 50 and penalty as per section 74. Also please guide next course of action to be taken

Ans. In relation to your query pertaining to Interest under section 50 and penalty under section 74 of the CGST Act, please find below the respone:

As per sub-section (3) of section 50, where the input tax credit has been wrongly availed and utilised, the registered person shall pay interest on such input tax credit wrongly availed and utilised, at such rate not exceeding twenty-four per cent. as may be notified by the Government.

Further as per section 74(8), any person chargeable with tax but before service of notice under sub-section (1) of section 74, is required to pay the said tax along with interest payable under section 50 and a penalty equivalent to fifteen per cent.

As per section 74(8), any person chargeable with tax under sub-section (1) of section 74, is required to pay the said tax along with interest payable under section 50 and a penalty equivalent to twenty-five per cent, of such tax within thirty days of issue of the notice.

As per section 74(11), any person served with an order issued under sub-section (9) pays the tax along with interest payable thereon under section 50 and a penalty equivalent to fifty per cent, of such tax within thirty days of communication of the order.

Otherwise as per Section 74(1), penalty equivalent to 100 percent of the tax specified in the notice shall be levied.

60 A client has received notice u/s 74 along with DRC-01 in feb'22 in which he has been demanded whole ITC available in Credit ledger. His registeration was cancelled in dec 21 on account of wrongful availment of ITC of 516000 of FY 17-18 and 18-19 of one defaulting supplier. Now, how to calculate interest as per section 50 and penalty as per section 74. Also please guide next course of action to be taken

Ans. In relation to your query pertaining to Interest under section 50 and penalty under section 74 of the CGST Act, please find below the respone:

As per sub-section (3) of section 50, where the input tax credit has been wrongly availed and utilised, the registered person shall pay interest on such input tax credit wrongly availed and utilised, at such rate not exceeding twenty-four per cent. as may be notified by the Government.

Further as per section 74(8), any person chargeable with tax but before service of notice under sub-section (1) of section 74, is required to pay the said tax along with interest payable under section 50 and a penalty equivalent to fifteen per cent.

As per section 74(8), any person chargeable with tax under sub-section (1) of section 74, is required to pay the said tax along with interest payable under section 50 and a penalty equivalent to twenty-five per cent, of such tax within thirty days of issue of the notice.

As per section 74(11), any person served with an order issued under sub-section (9) pays the tax along with interest payable thereon under section 50 and a penalty equivalent to fifty per cent, of such tax within thirty days of communication of the order.

Otherwise as per Section 74(1), penalty equivalent to 100 percent of the tax specified in the notice shall be levied.

Q.59 Whether animals like Goat, Sheep, Chick, when sold after Cutting & Frozen (i.e after making it marketable from primary market) can be said to be covered in definition of Agricultural Produce?

Ans. As per NN 12/2017, agricultural produce is defined as:

“agricultural produce” means any produce out of cultivation of plants and rearing of all life forms of animals, except the rearing of horses, for food, fibre, fuel, raw material or other similar products, on which either no further processing is done or such processing is done as is usually done by a cultivator or producer which does not alter its essential characteristics but makes it marketable for primary market;

It is evident from the definition that agricultural produce includes the rearing of animals except for horses, on which if any processing is done then it should not alter the essential characteristics but only makes it marketable for the primary market. If it is so exactly then the same will be covered under agricultural produce.

Further, Chapter 2 of the customs tariff which deals with Meat & edible meat offal can be referred to which broadly categorize it as :

• Meat – Fresh and Chilled – NIL rate
• Meat- other than Fresh & Chilled & put up in a unit container & bearing brand name – 5% rate