As per proviso to section 16(2) read with Rule 37, a business entity who fails to pay the vendor within 180 days of issue of invoice has to reverse the ITC 'Availed' on such invoices.
All will agree that there is vast difference between ITC availed and ITC utilized. Unless ITC availed is 'utilized', there is no loss of revenue to government.
It is not clear why the statute provides for reversal of ITC 'availed' with interest under Rule 37 read with Sec.16(2).
Can anyone throw light on this.
For reversal, it is provided that relevant ITC will be treated as output tax. Strangely it appears that this output tax can be discharged by utilizing the same ITC which is being reversed.
Is my understanding correct.
Debate on GST rule: Why reverse Input Tax Credit with interest if availed but not utilized? Legal interpretations explored. A forum discussion revolves around the Goods and Services Tax (GST) provision requiring businesses to reverse Input Tax Credit (ITC) if they fail to pay vendors within 180 days of the invoice date. Participants debate the difference between ITC 'availed' and 'utilized,' questioning why reversal with interest is required if ITC is merely availed but not utilized, as it poses no revenue loss to the government. Historical legal precedents and interpretations by various courts and circulars are cited to explain the government's stance on charging interest on availed credit. The discussion highlights ongoing confusion and legal interpretations regarding ITC reversal. (AI Summary)
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