This circular provides clarity on when interest is payable for wrongly availed IGST credit. It explains that interest under section 50(3) applies only when such wrongly availed credit is actually utilized. For determining utilisation, the total ITC balance across IGST, CGST and SGST must be considered together, since all can be used for paying IGST. If at any point before reversal the combined ITC balance falls below the amount wrongly availed, the shortfall is treated as utilisation and attracts interest. If the combined balance never falls below the wrongly availed amount, no interest is payable, even if the IGST balance alone is insufficient.

The circular also clarifies that compensation cess credit cannot be factored into this calculation because it cannot be used for payment of IGST, CGST or SGST, nor for reversing such credits.