input credit

[ashwin jivanlal]

Section 16 of CGST Act Povides Claims of Input Tax Credit,

sub section c of section 2 of section 16 put restriction on receiver of good/services on the basis of of credit reflected in 2B, receiver can claim credit only if supplier has filed form R1 and it is reflected in 2B.

sub section (d) of section 2 of section 16 provides that if receiver has not made the payments to supplier whithin 180 days from date of bill the receiver needs to reverse the input credit and liable to pay along with interest,

MY QUERY;

if supplier has paid tax and filed his form F1 showing the tax paid by him but receiver did not pay to supplier in 180 days , as per sub section c of 2 of 16 receiver can claim input credit but as per sub section(d) of 2 of section 16 receiver has not made payments to supplier in 180 days he has to reverce the credit and to pay with interest..

goverment has received gst payments in time the sufferer is supplier why gst is to be paid twice on same transaction double with interest? one supplier has paid in time and on reversal receiver will pay with interest. pl. answer.

[Amit Agrawal]

Dear Shri Alkesh Jani Ji & Shri Kasturi Sethi Ji,

I hope your find my answers worth your time reading them.

Please do not hesitate to raise further questions (if any) after taking into account my various posts above.

I consider all this as healthy way to refine our thought process, to know alternate views with reasons thereof and to come to better conclusions on legal issues raised on this public forum.

I also believe that nothing teaches you better on questions of law that strong counter arguments. And I am thankful to you for the same.

With warm regards,

Amit Agrawal

[Amit Agrawal]

Correction in earlier post. Please read relevant line as follows: I also believe that nothing teaches oneself better on questions of law that strong counter arguments. And I am thankful to you for the same!

[Alkesh Jani]

Shri Amitji,

Thanks for your views, concluding the discussion from my end I will just say that let us wait for the decision from the legal forum.

Delay in replying is regretted.

Thanks

[Amit Agrawal]

Thanks for your reply, Shri Alkesh Jani Ji! Even I am eager to know how law shapes up in this regard, specially once such matter reaches higher forum/s like tribunal and above.

[Amit Agrawal]

In the context of discussion we had earlier, your attention is invited to an article on TMI bearing subject-line: Impediment of payment to supplier within 180 days: Legislature should act before the Judiciary steps in

Link: https://www.taxtmi.com/article/detailed?id=11026

[ashwin jivanlal]

good observation from my all learned friends can receiver transfer outstanding to unsecured loan and avoid reversal with interest, why receiver should pay interest to govt who has recd. gst payments from supplier in time . interest on transfer to unsecured loan account may be paid to supplier who has really invested money and blocked his working capital..

[Amit Agrawal]

I also hold a view that no interest is payable u/s 50 if reversal / payment of ITC is done u/r 37 within / the end of the time limit specified in the second proviso to sub-section (2) of section 16.

And this position remains, in my humble view, even if such ITC was utilised in-between period (i.e. between date of availment of such ITC & its reversal within / at the end of the period of 180 days specified in said proviso).

These are ex facie views of mine and the same should not be construed as professional advice / suggestion.

[Amit Agrawal]

With regards to my last post above, one may refer to discussion under Issue-ID: 118865 bearing subject-line as 'Interest on reversal on non payment to vendors within 180days'.

There, I tried to explain the legal argument/s supporting a view that interest u/s 50 cannot be levied on subject situation under discussion here.

These are ex facie views of mine and the same should not be construed as professional advice / suggestion.

[Padmanathan KV]

To supplement the views of Ld Amit Ji,

A.1. The expression “fails to” appears 31 times (inc proviso to section 16) in the CGST Act.

A.2. However, in all the 30 provisions except under proviso to section 16, where expression “fails to” provides for some consequence such as issuance of notice/ levy of interest/ penalty etc, there is always statutory obligation cast upon the person to do/not to do a particular act.

A.3. For instance:

1. 35(6) Subject to the provisions of clause (h) of sub-section (5) of section 17, where the registered person fails to account for the goods or services or both in accordance with the provisions of sub-section (1), the proper officer shall determine the amount of tax payable on the goods or services or both that are not accounted for, as if such goods or services or both had been supplied by such person and the provisions of section 73 or section 74, as the case may be, shall, mutatis mutandis, apply for determination of such tax
2. 46. Where a registered person fails to furnish a return under section 39 or section 44 or section 45, a notice shall be issued requiring him to furnish such return within fifteen days in such form and manner as may be prescribed.
3. 47(1) Any registered person who fails to furnish the details of outward or inward supplies required under section 37 or section 38 or returns required under section 39 or section 45 by the due date shall pay a late fee of one hundred rupees for every day during which such failure continues subject to a maximum amount of five thousand rupees.
4. 50(1) Every person who is liable to pay tax in accordance with the provisions of this Act or the rules made there under, but fails to pay the tax or any part thereof to the Government within the period prescribed, shall for the period for which the tax or any part thereof remains unpaid, pay, on his own, interest at such rate, not exceeding eighteen per cent., as may be notified by the Government on the recommendations of the Council:

A. 4. In the above provisions illustrated, the consequence for the "failure" i.e, determination of tax, issuance of notice, levy of late fee, interest etc… is associated with some statutory requirement under the CGST Act such as maintenance of Accounts and records, filing of return, payment of tax etc....

A. 5. Only the second proviso to section 16 provides for a consequence (in form of payment of amount equal to input tax availed along with interest payable) without there being a statutory obligation under the CGST Act to make payment within 180 days.

B. 1. It is worthwhile to note section 15 of MSMED Act, 2006 which reads as below:

15. Liability of buyer to make payment.—Where any supplier, supplies any goods or renders any services to any buyer, the buyer shall make payment therefor on or before the date agreed upon between him and the supplier in writing or, where there is no agreement in this behalf, before the appointed day:

Provided that in no case the period agreed upon between the supplier and the buyer in writing shall exceed forty-five days from the day of acceptance or the day of deemed acceptance.

B. 2. Pls note "appointed day" means the day immediately following the 15 days of the date of the acceptance of goods or day of the deemed acceptance of goods.

B. 3. Therefore, MSMED Act places a statutory obligation to make payment within 15 days and in case of agreement for longer period, then such longer period which shall not exceed 45 days.

B. 4. Thus, one needs to examine whether GST Act can impose consequence for the violation of provisions of MSMED Act (as there is no such provision under GST Act itself), where separate consequences are provided in MSMED Act itself such as interest at 3 times bank rate etc..

B. 5. if even the answer to the above is affirmative, the payments to those suppliers who are not MSME are not regulated by provisions of Section 15 of MEMED Act, 2006.

AI Summary

Input tax credit reversal: failure to pay supplier within the statutory period triggers reversal and interest, subject to payment terms.
Section 16(2) proviso conditions continuance of input tax credit on payment to the supplier within a statutory period and mandates reversal plus interest where the recipient fails to pay. Contributors debate whether a supplier's prior tax payment or an agreed longer payment term prevents immediate reversal, arguing that the proviso operates upon an actual failure to pay (i.e., supplier grievance) rather than mere non payment at the statutory cut off; pre GST Cenvat circulars and cases are invoked to support a commercial context interpretation, and practical consequences including reclaiming ITC after payment and the applicability of interest are examined.