Written Back of Liabilities as on more the 3 years ( Material and Services)

[Prem Choudhary]

Dear expert

please advice for consequences in Service tax, Excise and GST , if we are written back the Credit balance of Creditors ageing more then 3 years.

[KASTURI SETHI]

Dear Querist, Written back means already written off and now you want to write back. Pl elaborate on what account earlier these were written off. More details are required for correct reply. Prima facie, writing back will impact all the taxes mentioned by you but how and to what extent, reply is possible only after more details are posted.

[Prem Choudhary]

Sir

Terms of "Written Back" means the liabilities(Creditors or provisions) which are credit balance(payable) however this is no longer require to pay, the balance may be for supply of material or Services rendered in past( here more then 3 years).

For written back entry :-

These balance of respective of liabilities are debited and Credited to Profit and loss account .

[Ganeshan Kalyani]

In my view the input tax credit already taken on the purchase from the vendor (creditor) whose liability has been written off need to be reversed.

[Ganeshan Kalyani]

As per section 16 (2)(d) of CGST Act, states that if 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.

Hence, if the amount payable to the creditor that is the supplier is written in that is not paid then credit should be reversed .

[Prem Choudhary]

Amount is related to earlier taxation i.e Excise and Service tax period.

[KASTURI SETHI]

I agree with Sh.Ganeshan Kalyani Ji .His reply is also applicable for pre-GST.

[Ganeshan Kalyani]

Thanks Sri Kasturi Sir.

[KASTURI SETHI]

Sh.Ganeshan Kalyani Ji, On the basis of your replies posted in accounting matters for the last three years, it is my observation that you are specialist in commerce or accounting matters in relation to Service Tax and GST. This is a fact no exaggeration.

[Ganeshan Kalyani]

Thank you so much Sri Kasturi Sir for your appreciation.

AI Summary

Input tax credit reversal may be required where longstanding creditor liabilities are written back, affecting GST and pre GST taxes. Write backs of long outstanding creditor balances can trigger input tax credit reversal where the supplier remains unpaid; such reversals affect GST and, by analogy, pre GST Excise and Service Tax positions, and may attract interest or additions to output tax liability. Determination depends on the prior accounting treatment of the write off and whether input tax credit had been availed, with possible re availment if payment is later made.