Reversal of ITC

[Jitendra Sahu]

Hi
I have claimed ITC of ₹ 18,000/- in the month of March,2019 but supplier payment has done on March, 2020. According to provision i have to reverse the ITC within 180 days but i couldn't do as so. I have file my 3B Return till Jan,2020 with no reversal of such ITC which has claimed.
Please suggest the action should be taken now for above default.
Thanks

[KASTURI SETHI]

Reverse ITC in the next return along with interest. Interest is to be paid from the date of taking ITC and till the date of reversal. See proviso to Section 16(2) of CGST Act, 2017 extracted 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 :

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."

[YAGAY and SUN]

Though procedure was not complied with in this matter, in our view only interest would be payable for the period involved due to delay in payment, as in March 2020 payment was received.

[KASTURI SETHI]

Dear Querist,

My reply may be read with Rule 37(3) of CGST Rules which is extracted below:-

RULE 37. Reversal of input tax credit in the case of non-payment of consideration. -

(3) The registered person shall be liable to pay interest at the rate notified under sub-section (1) of section 50 for the period starting from the date of availing credit on such supplies till the date when the amount added to the output tax liability, as mentioned in sub-rule (2), is paid

[Ganeshan Kalyani]

Yes, only interest is liable to be paid.

AI Summary

Reversal of Input Tax Credit: reverse ITC in the return and pay interest for period of non payment.
If a recipient fails to pay the supplier within the prescribed period after availing ITC, the recipient must add an amount equal to that ITC to output tax liability and reverse it in the return, and pay interest from the date the credit was taken until the date of reversal. The practical step is to reverse the ITC in the next return and discharge interest for the period of non-payment; commentators note that where payment was later made, only interest is typically required.