re GST on capital goods

[Madhavan iyengar]

Company A sent certain capital goods free of cost to company B ( both are not related parties) and has issued a invoice charging gst (since it is sent FOC without any consideration) the recipient B has taken credit and the recipient has only paid the gst amount to Company A

Query: whether Company B not required to reverse the ITC

AI Summary

Input tax credit reversal: recipient may need to reverse ITC when payment to supplier for supplied goods is not made.
Supplier issued invoice for capital goods supplied free of cost; one view invokes the proviso to rule 37 to deem value paid and avoid reversal of recipient ITC, while the alternate view applies the proviso to the second proviso of section 16(2), requiring the recipient to add the ITC to output liability if it fails to pay the supplier within the prescribed period, and notes supplier ineligibility for ITC on gifts or free supplies.