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Input Tax Credit (ITC) Reversal for Non Payment to your suppliers

As per Section 16(2) Second & Third Proviso of CGST Act,2017 , if a Tax payer fails to pay the supplier of goods or services or both, within 180 days from the date of Invoice, the amount equivalent to the Input tax Credit (ITC) availed by the recipient shall be added to the output liability along with Interest.

The ITC so reversed shall be claimed once the payment is made subsequently.

Other Points to be noted

  1. 180 days should be accounted from the Date of Invoice by the supplier and not the date from which the same is accounted by the recipient
  2. The Interest shall be payable from the date of availment of credit till the date of reversal
  3. Mere payment of tax amount will not entitle you to claim the Credit. The invoice amount along with tax should be paid fully.
  4. In case part payment is made, the reversal shall in the same proportion
  5. This provision is not applicable to ITC Claimed under Reverse Charge Mechanism (RCM)
  6. The payment can be by way of book entries also (Credit Notes , etc.,)
  7. Branch Transfer outside State will not be covered under this provision

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2 thoughts on “Input Tax Credit (ITC) Reversal for Non Payment to your suppliers”

  1. I don’t think no assesse is following above rule and also gst audit team also not raising this iss

  2. May be true. But in case of departmental audit or any query from GST department they will look into it.

    Its better to comply..

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