Vendor Payment delay behind 180 days

[SURYAKANT MITHBAVKAR]

We manufacture Pharmaceuticals Machinery. We have purchased one unit from our vendor on July-20 with payment terms of balance 10% after installation and successful trial at our Customers site.

Please note that we have availed full GST credit in the month of July-20. But till date the installation is not done at our customer site and the 10% payment to vendor is still outstanding for more than a year.

As per GST provision payment to be made to vendor within 180 days from the date of supply. Under the above condition kindly advice us.

[Rajagopalan Ranganathan]

Sir,

Since you have already paid 90% of the invoice amount to the supplier, you can avail of the full ITC. Only when you did not pay the full amount of the Invoice then only you have to reverse the credit taken along with interest.

[KASTURI SETHI]

If 90 % amount (including GST) is paid, only 10 % tax amount (ITC) is to be reversed i.e. partial payment, reversal will be proportionate to the amount not paid.

[Shilpi Jain]

Agree with kasturi sir. There is one more view in this regard.. since the 10% amount is not due for payment, it can be said that there is no failure to pay tax and hence reversal of credit is not required w.r..t the 10% amount as well. That means entire credit can be taken as of now.

[Ganeshan Kalyani]

I agree with the views of Sri Kasturi Sir. Since 90% payment is made then ITC proportionate to 90% is only eligible. Sect 16 states that the "value of supply along with tax payable thereon" shall be paid to the supplier within 180 days. There is not word which states that "amount due" shall only be paid. So in my view 10% proportionate ITC needs reversal.

[SURYAKANT MITHBAVKAR]

Thanks for your Valuable reply.

Kindly note that we have paid to our vendor (90% of total value + 100% of GST Value)

In such case kindly advise whether we have to reverse the proportionate amount.

[KASTURI SETHI]

Sh.Ganeshan Kalyani's reply is very much clear. Note the language of Section 16"value of supply along with tax payable thereon"

[Shilpi Jain]

Assumin you are taking a safe stand of not taking credit to the extent not paid to endorse, and say your invoice value is rs. 100 + 18 gst and if you have paid 113 I.e. 85+18 to the supplier you can take credit to the extent of 113/118×18.

You cannottake entire 18 as credit

AI Summary

Input tax credit reversal: proportionate reversal may be required when vendor payment is delayed beyond statutory period. Where full consideration is unpaid beyond the statutory period, the input tax credit attributable to the unpaid portion should be proportionately reversed; contributors disagree whether payment of the tax component alone allows full credit, but the conservative compliance position is to reverse the proportionate ITC attributable to the unpaid consideration and account for any interest liability.