Input credit reversal due to non payment in 180 days

[sunilkumar bhageria]

As per GST provision if payment is not made to supplier within 180 days from invoice date then input credit along with interest is required to be reversed. My queries is if we reverse the input credit before 180 days say after 160 -170 days once it become sure that we will not be able to make payment upto 180 days(due to some contractual agreement payment not yet due) even than interest is required to be paid for say upto 160 days or not.

[KASTURI SETHI]

Interest is required to be paid for 160-170 days inasmuch as a period of 180 days is the maximum limit. No free-lunch allowed for 160-170 days.

As per Section 16(2) of CGST Act interest is payable from the date of issue of the invoice by the supplier. As per Rule 37(3) CGST Rules, interest is payable from the date of avaling ITC in books of account. So Section will override Rule.

[Ganeshan Kalyani]

See the proviso of section 16(2)(d) of CGST Act, which is reproduced below.

"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:"

In rule time limit of 180 days is not given. Hence, section will prevail and according to which interest becomes payable.

[Ganeshan Kalyani]

Also, the time limit of 180 days be counted from the date of issue of invoice by the supplier.

AI Summary

Input tax credit reversal applies where recipient fails to pay supplier within the statutory period and interest is payable.
Where a recipient fails to pay the supplier within the prescribed period from the date of issue of the invoice, the recipient must add an amount equal to the input tax credit availed to his output tax liability along with interest. The statutory provision specifies that the time-limit is counted from the invoice date and that interest is payable from the invoice date, a rule which prevails over any contrary provision commencing interest from the date of availment in books. Reversal prior to the period's expiry does not avoid interest for the period up to reversal.