GST reversal u/s 37 for creditors

[RAVI MUNDRA]

i have both sales and purchase from one party. i have maintained 2 ledgers for Purchase and Sales. We always have Receivalbe  from this party.

Even though Se maintain a net "Debit balance" (meaning more receivables than payables) with this party overall, the GST departments query focuses on specific credit balances (your payables) that have exceeded the 180-day limit.

[Sadanand Bulbule]

What exactly is the query?

[RAVI MUNDRA]

This refers to your query regarding credit balances (payables) exceeding 180 days with our party,

1. Nature of Transactions: We maintain both sales and purchase transactions with Party. For accurate accounting and statutory compliance, we operate two separate ledgers for recording our purchase payables and sales receivables from this party.

2. Overall Net Position: While there may be instances of credit balances (payables) in our purchase ledger that have exceeded the 180-day limit, it is crucial to note that our overall net balance with Party consistently remains a debit balance. This signifies that the total receivables from (from our sales ledger) are always higher than our total payables to them (from our purchase ledger).

[Raam Srinivasan Swaminathan Kalpathi]

This is a practical problem facing companies which purchase goods or services and also supplies goods or services to the same "person" (Person as defined in S.2(84)).  Nonetheless, there is a solution.  While providing the audited accounts please ensure that the supply invoices are set off against the trade receivable balances such that no credit outstanding is shown to be over 180 days.  Department Circular is available allowing such netting off.  Please be rest assured that department is never going to accept your argument that ultimately after set off there will be a debit balance only in the books.  Relief may be possible at FAA or with the Tribunal only.  Thanks

[KASTURI SETHI]

Books of accounts are a statutory records. In my view, you may get fair justice at the first stage i.e. at the hands of Original Adjudicating Authority. 

AI Summary

GST reversal obligations for aged creditor balances: invoice netting may avoid reported overdue payables, dispute risk persists.
Revenue enquiries focus on specific aged creditor entries recorded in the purchase ledger even if the overall net position with the counterparty is a debit. To avoid showing individual aged payables, audited accounts should offset supply invoices against trade receivables so that no credit entry appears overdue; a departmental circular allowing netting may apply, but the department may contest this and relief may need adjudication. Books of account are statutory records and the presentation of offsets may be challenged by the department.