ITC Eligibility

[Ethirajan Parthasarathy]

 As per Schedule 1, certain transactions between related parties attract GST even if no consideration is charged. This means entity providing service will have to raise invoice for a certain amount & calculate GST thereon. Let us assume one such invoice is raised by Company “A” to Company “B” for a sum of Rs.1,00,000/- plus 18% GST. Section 16 provides the following condition to be complied with by Company B for taking input tax credit.

“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”

It is not clear how Company B will satisfy the above condition when they are not really liable to pay 1,18,000/- to Company A. At the most, they can only pay 18,000/-. I request the experts to give their opinion.

AI Summary

Input tax credit eligibility: deemed payment for specified schedule supplies prevents ITC reversal when consideration not actually paid.
For supplies treated as made without consideration under the specified schedule, the value of those supplies is deemed to have been paid for purposes of the payment-linked reversal rule; accordingly, a recipient need not reverse input tax credit for failure to pay the actual notional consideration within the prescribed period.