Input Tax Credit reversal for delayed supplier payment may apply unless contractual terms or force majeure excuse non-payment.
Second proviso to section 16(2) conditions entitlement to Input Tax Credit on the recipient's payment of invoice value plus tax to the supplier within a statutory period and prescribes reversal of ITC with interest where the recipient "fails to pay." The proviso raises legal issues where contractual payment terms exceed the statutory period, implicates privity of contract, and produces hardship in contexts like retention monies and post-supply discounts. The author recommends legislative reliefs: carve-outs for contractually governed non-payments, suspension during extraordinary crises, and mitigation of interest consequences. (AI Summary)