GST - ( REMEDY TO ADJUST LATE PAID TAX WITH INTEREST )

[VIPUL JHAVERI]

Dear Experts

kindly guide for pharma mfg client for expansion bldg contractor during fy 20-21 raised bill say appx 50 lakhs and gst @18% at rs 9 lakhs was also added in his bill which were accounted and itc for 9 lakhs claimed however due to covid at contractor end due to hospitalisation of staff and owners contractor failed to file same in gst return nor paid this gst billed in 21-22,

on pointing out same he paid in dec 22 tax of 9 lakhs with 2 lakhs interest however now gst officer informed last date to-avail credit was sep 22 so no itc credit for co is possible and nor contractor get this back pl suggest way out to use this tax payment made and avail credit also pl note ,while paying in dec 22 vendor mention 21-22 invoice dates as 22-23 dates so then he can make payment in 22-23 for 21-22 bills made possible

[KASTURI SETHI]

Section 16(4) of the CGST Act is very much clear. The date of issuance of invoice is relevant for the purpose availment of ITC. In CGST Act, ITC cannot be regularized on the basis of late payment of tax along with interest. There is no such provision in CGST Act.

 

 

[Shilpi Jain]

In case you have availed credit within the time limit given in section 16(4) and it is merely that the vendor has paid the tax after such time limit, in my view, credit should not be denied.

The Government cannot unjustly enrich itself by collecting tax from the supplier and not giving credit to the recipient in this case.

Also the circular issued for obtaining the declaration from vendor or a CA certificate to prove/certify that the payment of tax is made by the vendor, also does not require or mention that the payment should have been made by vendor within the time limit u/s 16(4). However this matter will have to be settled by Courts. Hence you can consider to fight any notice considering the amount of dispute involved.

[KASTURI SETHI]

Sh. Vipul Jhaveri Ji,

There are so many legal hurdles in your way. Timely issue of invoice, time of supply of service, filing of returns, late payments etc. On this issue most of the judgements (including Supreme Court) are in favour of Govt.

Keeping in view of a huge amount involved, you must fight only through expert Advocate. Each case has different facts and circumstance. Full facts are not known to me here. It will be a long battle.

[VIPUL JHAVERI]

thanks a lot kasturi ji and shilpi ji for valuable and frank expressions

i share similar view as mentioned by shilpi ji,
that once tax payment is made credit denial is hard to accept or it need to be refunded back to payer in that case as logical action , also to add vendor contractor had obtained ca certificate and submitted to buyer company as well.

Even though matter is complicated but one of the two parties need to get back what gets paid,

thanks to show a ray of hope and for alert to be ready to face complex legalities and seems worth to attempt
Thanks a lot

[Padmanathan KV]

However, isnt ITC on building construction blocked under section 17(5) of the Act?

[VIPUL JHAVERI]

THIS IS BOOKED UNDER REPAIRS AS IT WAS RESTORATION EXPNSES ON OLD BUILDING AND NOT CAPITALSIED IN BOOKS AND SO ITC IS ALLOWABLE

[Padmanathan KV]

In the original query it was "expansion". Any how, I am not getting to accounting treatment/ other part of the issue.

You will have to defend the case saying that there is no such restriction under 16(4) that supplier has to pay tax/file GSTR-1 within Section 16(4) time limit. Once you have claimed ITC within time and subsequently supplier has paid tax with interest, you cannot be denied credit.
 

[VIPUL JHAVERI]

Thanks a lot Padmanathan ji & Conrubutors

you are very right , in fact to be on safer side , we have deducted gst equivalnet amount from contractors next bill to safegurd us however i think he also getting undly penalised for payment dealy in his part mainly for covid hospitislation may be or staff turonver etc whatever, however when pointed out, honestly and in good faith he discharge his laibility with interest and now he is speechless to know , not getting same from us nor refund from govt is seeminlgy possible, so i am exploring possibility to bail him out , if we secure credit we can reimburse him for same or find way out to ask him to apply for refund as values are failry large and simple matter gone into undue complication , law can not override its intentions so i am hopeful it will sail through thanks a lot share your valube view a and showing positive possibilites

[ssr reddy]

See Section 16(2)(aa)- invoice detail is compulsory in GSTR-1 to take ITC.

[VIPUL JHAVERI]

SSR Ji,
thanks to bring out , and will take care - however (16(2)(aa)) of reflection in outward supplies returns G1 made wef 1/1/22 so i think for prior period dated invoices this should not be a real constraint.

AI Summary

Pharma Client Denied Input Tax Credit Due to Late GST Payment; Experts Debate Legal Options Under CGST Act A pharma manufacturing client faced an issue where a contractor billed for services in FY 20-21, including GST, but due to COVID-19, the contractor delayed GST payment until December 2022. The GST officer denied Input Tax Credit (ITC) as the payment was made after the September 2022 deadline. Experts discussed the legal complexities, emphasizing that ITC cannot be regularized for late payments under the CGST Act. Some suggested challenging this in court, arguing that the government should not benefit from tax payments without granting credit. The client considered options to resolve the issue, including potential reimbursement or refund claims.