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 department challenges input tax credit reversal under section 37 for credit balances exceeding 180 days despite net debit position A taxpayer maintains separate purchase and sales ledgers for transactions with the same party, resulting in an overall net debit balance but specific credit balances exceeding 180 days. The GST department queries credit balances surpassing the 180-day limit for input tax credit reversal under section 37. Legal experts suggest using departmental circulars allowing netting off of supply invoices against trade receivables in audited accounts to avoid showing credits over 180 days. However, departments typically reject arguments about net debit positions, with relief potentially available only through First Appellate Authority or Tribunal proceedings.