Concept related to Input tax credit allowance if the recipient does partial payment to the supplier during the period of 180 days from the issue of invoice by the said supplier.

The query is related to section 16 (2) proviso 2 of GST act-

There is a contradiction in the institute' s material and certain videos related to the following matter-

1)In case if the recipient does partial payment of value of supply to the supplier within the said 180 days from the date of issue of invoice:

i)Whether proportionate credit would be allowed on the 181 st day , to the recipient and the remaining would be reversed and added back to the output tax liability along with interest in the return of 7 th month following the availment of credit by the recipient. OR

ii)Whether the whole credit will be disallowed and no allowance of credit on proportionate basis will be given and then whole credit would be added to output tax liability of the 7 th month following the availment of credit by the recipient , unless the whole value of supply is paid to the supplier.

Please make the clarifications.
Thank you

CA Dhanashree Bendre
Mem no.-173360
Replies (1)
Refer Rule 37 of GST rules 2017-
The credit will be reversed and added back to output liability on proportionate basis to the amount of value not paid to the supplier as per sec 16(2) second proviso.

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