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Non payment to supplier within 180 days

Kallol Sarkar (Accountant) (188 Points)

15 November 2019

In GST 28th council meeting dtd. 21.07.18, it was proposed that " In case the recipient fails to pay the due amount to the supplier within 180 days from the date of issue of invoice, the input tax credit availed by the recipient will be reversed. Liability to pay interest is being done away with in that case."

My question is as of now whether interest to be paid in above case or not? Because there is no amendment of CGST act or further notification regarding waiver of interest

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4 Replies

Anshika Aggarwal (Chartered Accountant) (186 Points)
Replied 15 November 2019

Yes, interest is to be paid when reversing the ITC credit.

As per section 16(2) of 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 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, in such manner as may be prescribed.

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Pankaj Rawat (GST Practitioner) (55047 Points)
Replied 15 November 2019

Rule 37(3) of the CGST rule states the interest is to paid at rate notified under section 50(1) when payment is not made within 180 days

Kallol Sarkar (Accountant) (188 Points)
Replied 16 November 2019

That means recommendation of GST council for interest waiver has not been honored.

Anyway, What will be interest rate 18% or 24%?

CA Pranav Mishra (241 Points)
Replied 17 November 2019

Kindly refer proviso as per finance act Interest on delayed payment of tax. 50. (1) Every person who is liable to pay tax in accordance with the provisions of this Act or the rules made thereunder, but fails to pay the tax or any part thereof to the Government within the period prescribed, shall for the period for which the tax or any part thereof remains unpaid, pay, on his own, interest at such rate, not exceeding eighteen per cent., as may be notified by the Government on the recommendations of the Council. 1[Provided that the interest on tax payable in respect of supplies made during a tax period and declared in the return for the said period furnished after the due date in accordance with the provisions of section 39, except where such return is furnished after commencement of any proceedings under section 73 or section 74 in respect of the said period, shall be levied on that portion of the tax that is paid by debiting the electronic cash ledger.]