GST REVERSAL IF PAYMENT OF INVOICE AMOUNT NOT MADE

[SAFETAB LIFESCIENCE]

Dear Experts,

Please inform in details about the reversal of ITC taken if the payment of value of bill is not paid within 180 days.

Also, please confirm, if the GST amount is paid and part payment is made. In such scenario, what is the procedure ??? How to calculate 180 days ?? It is applicable for Goods and Service ????

[Ganeshan Kalyani]

Sec 16(2)(d) "Provided further that 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:"

[Ganeshan Kalyani]

Sit, since the provision states that basic value plus GST has to be paid to the supplier so as to become eligible to claim credit. Therefore in my view, if you pay full GST or part payment having part GST will not make to eligible to claim credit.

[Ganeshan Kalyani]

Please read 'Sit' as 'Sir'.

In last line please read as 'will not make you eligible to take credit'

[KASTURI SETHI]

If the part payment is made to the supplier, the reversal will be proportionate to the amount not paid to the supplier.In other words, the recipient (buyer/receiver of goods or services) is entitled to the ITC to the extent of payment made against supply.

Proviso to Section 16(2) talks of _________fails to pay__________the amount. It does not talk of whole payment. If the recipient fails to pay 50%, ITC is to be reversed on 50% of payment not made. In other words, credit on the amount of 50% is allowed. Emphasis is supplied on 'failure to pay'. i.e. ITC is to be disallowed only on the portion of payment not made.

Punishment is for failure and not for the period for which the receiver has complied with.

Proviso to Section 16(2) says

Provided further that 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.

It is applicable for both goods and services.

A period of 180 days is to be calculated in view of time of supply. Time of supply is different/separate for goods and services.

[DR.MARIAPPAN GOVINDARAJAN]

If the payment is not within 180 days the ITC taken for such bill is to be reversed. If part payment is made within 180 days proportionate reversal is to be done.

AI Summary

Input tax credit reversal where recipient fails to pay supplier within prescribed period; partial payments trigger proportionate reversal and interest. Where a recipient fails to pay the supplier the value of supply along with tax within the prescribed period from invoice issue, an amount equal to the input tax credit availed must be added to output tax liability with interest. Partial payment results in proportionate reversal of ITC. The provision applies to both goods and services and the prescribed period is calculated with reference to the time of supply.