Input Tax reversal if payment not done with in 180 days

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If payment for supplied goods or services isn't received within 180 days of the invoice date, GST Input Tax Credit (ITC) generally needs to be reversed. Failure to do so can lead to interest and penalties during a departmental audit. However, recent rulings suggest that book adjustments, where receivables and payables are squared off, may not require ITC reversal, even if the products differ. This is based on the definition of 'consideration' in the CGST Act and specific advance rulings.

ARUN GUPTA

ARUN GUPTA (Querist)
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08 September 2021 Goods were supplied to a party in 2018-2019 but payment still not received. Can ITC of party be reversed by gst Department? What is the process for reversal?

ARUN GUPTA

ARUN GUPTA (Querist)
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08 September 2021 Pl reply so that gst query can be solved

Udaya Chandran

Udaya Chandran (Expert)
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09 September 2021 The payment for the supplies to be made within 180 days from the date of Invoice, else GST ITC to be reversed on self assessment basis. If not done, when the department audit is conducted, they would insist the same and levy interest, penalty, etc.

ARUN GUPTA

ARUN GUPTA (Querist)
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09 September 2021 What is the last date for audit for AY 2017-2018

ARUN GUPTA

ARUN GUPTA (Querist)
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09 September 2021 What is the last date for audit for AY 2017-2018 and 2018-2019?

Lekhraj sood

Lekhraj sood (Expert)
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09 September 2021 Yes it needs to be reversed but he can take back the credit when he makes the payment to you.However, interest will be a loss.

ARUN GUPTA

ARUN GUPTA (Querist)
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09 September 2021 We purchased Steel Goods from them and they purchases fabrics from us. So will the Accounts we squared off. Will there be any issue from GST side?

Udaya Chandran

Udaya Chandran (Expert)
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09 September 2021 As per my opinion, yes, the payment can be made by book adjustments.

ARUN GUPTA

ARUN GUPTA (Querist)
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09 September 2021 Will there be any issue if products are different?

Lekhraj sood

Lekhraj sood (Expert)
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09 September 2021 There is advance ruling in the case of Sanghvi motors where such settlement of receivables with payables has not been accepted for the purpose of input tax reversal and held that the reversal will be required. However, in my view the case may be argued.

ARUN GUPTA

ARUN GUPTA (Querist)
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09 September 2021 So any Judgement in favour of Adjustment has not come yet

Udaya Chandran

Udaya Chandran (Expert)
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09 September 2021 Please refer to the section 2(31) of CGST Act, ―consideration‖ in relation to the supply of goods or services or both
includes–
(a) any payment made or to be made, whether in money or otherwise,...................................

As per the above definition, consideration can be in money or otherwise, so book adjustment is considered as consideration for the supplies.

Also, refer to the Case Name : In re Senco Gold Ltd (GST AAR West Bangal)
Appeal Number : Order No. 02/WBAAR/2019-20

The ruling was favoured to applicant that there is no need to reverse ITC for book adjustments and can be considered as payment for the supplies made.

ARUN GUPTA

ARUN GUPTA (Querist)
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09 September 2021 So Adjustment of Payments can be done irrespective of products kind without any reversal of ITC FROM GST Department side.

Udaya Chandran

Udaya Chandran (Expert)
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09 September 2021 Yes, as per the rulings and the definition given in the Act.

ARUN GUPTA

ARUN GUPTA (Querist)
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09 September 2021 Everything is clear now. There will be no issues from GST Department side.

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