Section 16(2)(c)

[Rajesh Kumar]

A supplier of service is paying GST through GSTR-3B as half (approx.) of the liability declared in GSTR-1. Therefore, there is mismatch between GSTR-3B and GSTR-1.

Now. As per section 16(2)(c) which stipulates as under:-

c) subject to the provisions of section 41 section 41 or section 43A, the tax charged in respect of such supply has been actually paid to the Government, either in cash or through utilisation of input tax credit admissible in respect of the said supply;

Now, Whether the ITC is not available to the receipients of services ?

At what extent they are required to reverse ITC I.e. half ( proportionate to the unpaid duty liability) or full ITC which was availed ?

[Amit Agrawal]

Newly inserted Rule 37A in the CGST Rules, 2017 is "indicative" that in subject scenario, no reversal of any ITC at recipient's end is required.

Of-course, supplier will face music of law where Dept. will recover differential amount (with interest & penalty) ..... sooner or later. Again, newly inserted Rule 88C in the CGST Rules, 2017 explains the procedure for the same.

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

[Shilpi Jain]

A view can be taken that payment of tax by the supplier is something which is impossible for the recipient to identify and thereby need not be complied with. So the customer should be eligible to take credit.

However as mentioned by Amitji, there are rules which are being included to ensure that credit is not allowed to be taken if supplier does not file 3B. But by this, it does not mean that the customer is required to ensure that entire liability declared in GSTR-1 is paid by him.

This is actually impossible to identify by the customer.

[Rajesh Kumar]

Dear Experts,

Section 16(2)(c) clearly placed condition to avail itc that the tax charged in respect of such supply has been actually paid to the Government, either in cash or through utilisation of input tax credit admissible in respect of the said supply;

Then if party agree to reverse/pay the said itc to avoid litigation , then at extent they required to reverse against said portion of short payment by the supplier ?

[Shilpi Jain]

Conservatively the recipient could consider reversing the credit and taking it when the supplier pays tax.

AI Summary

Input tax credit entitlement may remain despite supplier underpayment, while recovery is pursued from the supplier. Input tax credit entitlement requires the supplier to have actually paid the tax charged; procedural rules indicate recovery of unpaid tax is directed at the supplier and do not automatically compel recipients to reverse ITC, though recipients may conservatively reverse and reclaim ITC when the supplier pays.