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Regarding section 37(2) Reversal of Input Tax Credit

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akash kalra

33 Points Posted on 26 January 2020

if payment not made within 180 to supplier and reversal of input not made what manner interest is applicable and when this payment made can registered person reclaim of input..

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Quick Summary

This discussion clarifies the implications of Section 37(2) concerning the reversal of input tax credit (ITC). It explains that if payment to a supplier isn't made within 180 days and ITC isn't reversed, interest at 18% per annum applies from the date of credit availed until reversal. The recipient can re-avail the credit once payment is made, but the interest itself cannot be reclaimed.

Pankaj Rawat

GST Practitioner

29904 Points Posted on 26 January 2020

To determine the period for computation of interest amount , Rule 37(3) of the CGST Rule states that interest is applicable & the rate notified u/s 50(1) is 18% for the period starting from date of credit availed till the Credit reversed in GSTR 3B under table 4(B)(2).

As per the 3rd proviso to section 16(2) the Recepeint can re-avail the credit on making payment for the same .

Note : Interest cannot be reclaimed.
Notification 13/2017 CT notify the rate of interest 18% u/s 50(1) of CGST Act