ITC against invoices paid after 180 days as per agreed terms

[MohanLal tiwari]

Dear Experts,

As per section 16 of CGST act. - where a recipient fails to pay to the supplier of goods or services or both, other than the supplies on which tax is payable on reverse charge basis, the amount towards the value of supply along with tax payable thereon within a period of one hundred and eighty days from the date of issue of invoice by the supplier, an amount equal to the input tax credit availed by the recipient shall be added to his output tax liability, along with interest thereon, in such manner as may be
prescribed:

Provided also that the recipient shall be entitled to avail of the credit of input tax on payment made by him of the amount towards the value of supply of goods or services or both along with tax payable thereon.

Few of our customers are making payment through 180 days LC wherein we are assured for payment from buyer but after 180 days.

kindly advise how they will be entitled for ITC.

[Alkesh Jani]

Sir, in my view, documents on the basis of which credit can be availed are:

a) Invoice issued by a supplier of goods or services or both

b) Invoice issued by recipient alongwith proof of payment of tax

c) A debit note issued by supplier

So the ITC can be availed on the basis of Invoice issued, the payment can be made within 180 days.

Our experts may like to correct me if mistaken.

[Ganeshan Kalyani]

Input tax credit need to be reversed if the invoice amount is not settled by the buyer within 180 days. The input tax credit is again becomes eligible on payment of the amount by the buyer.

[YAGAY andSUN]

In such transactions statutory interest may be payable.

[subramanian vijayakumar]

I agree with the view of kalyani sir

AI Summary

Input tax credit reversal: failure to pay supplier within prescribed period triggers addition to output tax liability until payment. If a recipient fails to pay the supplier for a taxable supply (excluding reverse charge supplies) within the prescribed period, the recipient must reverse the input tax credit by adding an equivalent amount to output tax liability with interest; the credit becomes available again on actual payment, subject to the applicable documentary and procedural requirements for availing input tax credit.