Part payments to creditors after 180

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This discussion addresses the correct method for calculating interest on payments made to creditors after the 180-day limit. The core question is whether interest should be calculated on the full amount from the credit date to the last payment, or proportionately on the remaining balance as payments are made. Guidance is provided referencing Rule 37(1) regarding the reversal of Input Tax Credit (ITC) and reclaiming it proportionately upon making part payments.

Krishna Murty

Krishna Murty (Querist)

24 October 2020 Dear All

We have made payment to creditors in different years after 180 days. Then the interest shall be calculated from the date of credit taken to last payment made to creditor for the total period on full amount, (or) proportionately as per the payments made to creditor on balance amount, which one is correct ? Kindly give your advise.

Lekhraj sood

Lekhraj sood (Expert)

24 October 2020 Since you have not paid the whole amount within 180 days, you need to reverse total credit on completion of 180 days with interest. You can then reclaim the credit proportionate to the part payment on making such part payment. See rule 37(1)
(1)A registered person, who has availed of input tax credit on any inward supply of goods or
services or both, but fails to pay to the supplier thereof, the value of such supply along
with the tax payable thereon, within the time limit specified in the second proviso to sub-
section(2) of section 16, shall furnish the details of such supply, the amount of value not
paid and the amount of input tax credit availed of proportionate to such amount not paid
to the supplier in FORM GSTR-2 for the month immediately following the period of one
hundred and eighty days from the date of the issue of the invoice.

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Krishna Murty

Krishna Murty (Querist)

24 October 2020 Sir After reversal of ITC how to calculate interest, if payment made partly in difference years

Lekhraj sood

Lekhraj sood (Expert)

24 October 2020 Sir, After reversal of whole credit why you still want to pay interest?

Krishna Murty

Krishna Murty (Querist)

28 October 2020 Sir it was reversed after one year

Lekhraj sood

Lekhraj sood (Expert)