Section 43Bh Disallowance

[JishnuKumar S]

Dear Experts,

I have a query regarding the partial payment disbursement to an MSME vendor. In our organization, we are encountering issues with vendors who are non-filers from a GST perspective. Is it possible to withhold the GST portion while releasing the payment? If so, what are the potential disallowence of doing so?

Regards

JK

[Ramanathan Seshan]

Dear JK,

The Act says "Any sum payable", that includes GST component as well. Hence that will be disallowed. Also, disallowance with respect to Micro and small vendors only, medium is not in the ambit of disallowance. I attach the bare Act for ready reference

"....any sum payable by the assessee to a micro or small enterprise beyond the time limit specified in section 15 of the Micro, Small and Medium Enterprises Development Act, 2006 (27 of 2006),...."

Regards,

S Ram

[VIPUL JHAVERI]

ANOTHER POSSIBLE VIEW MAY BE - GST IS PAYABLE MAX IN 180 DAYS AND IF FOR 

GST NON-REFLECTION ON PORTAL / NON-FILING OF RETURN FOR OUR BILL

GST PAYABLE TO VENDOR GETS SHIFTED FROM VENDOR ACCOUNT TO GST UNSEEN A/C- SUM PAYABLE TO VENDOR GETS REDUCED AND SO DISALLOWANCE MAY BE - ALSO GET REDUCED, ITS LOGICAL AND WITH LEGIMATE INTENTIONS

SO MOSTLY WILL HELP TO AVOID UNDUE DISALLOWANCES FOR GST CHRGED BUT YET TO SHOW UP ON PORTAL IN 2B

AI Summary

Disallowance under Section 43Bh: withholding GST from payments to non-filing micro or small vendors risks disallowance. Section 43Bh disallows any sum payable to a micro or small enterprise remaining unpaid beyond the statutory time limit, and the statutory phrase 'any sum payable' is interpreted to include the GST component; thus withholding GST when paying a micro or small vendor can attract disallowance. The provision excludes medium enterprises. An alternative operational view notes that if GST is not reflected due to supplier non-filing, GST may be treated separately in a suspense account, reducing the amount considered payable to the vendor and potentially lowering the disallowance.