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Non payment to supplier with in 180 days.

18 April 2020

when we failed to pay with in 180 days, then

can we reverse the ITC if balance is there
or
can we pay as the liability along with the liability for supply?

interest is to be paid for both the case as per rule.

if someone can help..

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6 Replies

CA Naveen Chand (Chartered Accountant) (12729 Points)
Replied 19 April 2020

you have to add such ITC in your output tax liability with interest @ 24 %

however , when you will make payment to supplier then you can take ITC earlier reversed

ITC can be taken on pro rata basis if part payment is made .

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Shivam RC (Student) (23683 Points)
Replied 19 April 2020

@ Sir Naveen CHAND, the Interest will be 18% p.a. and not 24%.

@ Sujit Kumar Sir,

As per the 2nd Proviso to Section 16(2) of the CGST Act 2017, "where a recipient fails to pay to the supplier of goods or services or both, other than the supplies on which tax is payable on reverse charge basis, the amount towards the value of supply along with tax payable thereon within a period of ONE HUNDRED and EIGHTY DAYS from the date of issue of invoice by the supplier, an amount equal to the input tax credit availed by the recipient shall be added to his output tax liability, along with interest thereon".

Since you have failed to pay the consideration to your Supplier within 180 days from the date of issue of invoice, you have to "REVERSE THE ITC CLAIMED" by adding it to your output tax liability along with Interest @ "18% p.a." Interest computation will be done from the date of credit availed and up to the date of Reversal.

3 Like

Pankaj Rawat (GST Practitioner) (55052 Points)
Replied 19 April 2020

Yes... as per 2nd Provisio to Section 16(2) ,R/w rule 37(2) ITC availed extend to the amount not paid shall be added to Output tax liability & Report the reversal in GSTR 3B under Table (B)(2) .

Rule 37(3) the interest need to be paid as the rate notified in Section 50(1) of CGST Act , Ie 18%

RAJA P M ("Do the Right Thing...!!!") (128091 Points)
Replied 19 April 2020

Yes I agreed to Mr Pankaj Rawat Ji reply...

18% Interest is applicable for the reversal of ITC which is non payment of purchase above 180 days.

1 Like

Sujit Kumar Das (75 Points)
Replied 20 April 2020

Correctly said.
But when we are taking the credit after doing the the payment to supplier, naturally the ITC input increases during the month which is not as per GSTR 2A and the authorities are sending notice having seen the higher ITC during the month.