GST payable on bad debts

[MAHENDRABHAI DESAI]

Dear Sir,

1) Whether it is mandatory to pay GST on bad debts as per GST Law ?

2) Whether NCLT will pass order to pay us GST paid on Bad debts on submission of challan ?

3) Tax Invoice and bad debts w/off in the same financial year implication on GST payable ?

Regards,

[KASTURI SETHI]

FAQ issued by Board in this context

Q. Where GST is charged on a supply of service and the amounts due from the customer become ire-coverable as a bad debt in commercial practice, would such GST paid on accrual basis be refundable to the service provider by the Government?

Ans. The adjustment of GST already paid is allowed only by way of issuance of credit/debit note in terms of Section 34 of the CGST Act, 2017. The proviso to Section 34(2) of the CGST Act, 2017 provides that no reduction in liability would be allowed if the incidence of tax has been passed on to another person. If bad debts are on account of deficiency in supply of services, or tax charged being greater than actual tax liability, or goods returned, GST paid on the same is refundable subject to fulfilment of the prescribed conditions. Therefore, GST already paid on bad debts, as used in the trade parlance, cannot be adjusted.

[DR.MARIAPPAN GOVINDARAJAN]

Once invoice is issued you would pay the gst. Bad debt arises only if the dues are unable to collect after taking much effort. You have to write off both the value of the invoice and also the tax portion.

[Hitendra Bhandari]

What if the Bad Debts became known in the same month. before filing return is it possible to not report such supply on which recovery is bad debt?

AI Summary

GST on bad debts: adjustment allowed only via credit or debit note; refund limited where tax was passed on.
Adjustment of GST already paid is allowed only by issuance of a credit or debit note; no reduction is permitted where the incidence of tax has been passed on to another person. GST paid on commercial bad debts cannot be adjusted merely because recovery failed, except where the debt arises from deficiency in supply, tax charged exceeding actual liability, or goods returned, subject to prescribed conditions for refund or adjustment. Practically, tax is payable on invoice issue and tax must be written off with the invoice when a debt is written off.