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Analysis of validity of section 16(2)(D): Reversal of Input tax credit if payment is not made to supplier within 180 days
VALIDITY OF SECTION 16(2)(D) IN THE EVENT OF NON-PAYMENT OF CONSIDERATION WITHIN 180 DAYS WHEN SUPPLY IS FROM ONE GSTIN TO ANOTHER GSTIN OF THE SAME LEGAL ENTITY/PAN
Reversal of Input tax credit if payment is outstanding made within 180 days
Input Tax Credit reversal on GST invoices that are outstanding payment even after one eighty days from the date of issue is covered by U/s 16(2)(d) of the CGST Act.
According to section 16(2) : Notwithstanding anything contained in this section, no registered person shall be entitled to the credit of any input tax in respect of any supply of goods or services or both to him unless u/s 16(2)(d) he has furnished the return u/s 39 of CGST Act;
Provided further that where a recipient fails to pay to the supplier of goods or services or both, other than the supplies on which tax is payable on reverse charge basis, the amount towards the value of supply along with tax payable thereon within a period of one hundred and eighty days from the date of issue of invoice by the supplier, an amount equal to the input tax credit availed by the recipient shall be added to his output tax liability, along with interest thereon, in such manner as may be prescribed:
IS Input Tax Credit has to be reversed when supply is made from 1 GSTN to another GSTN of same legal entity Book Adjustment Entry or without consideration?
CGST Rule 37: Reversal of Input Tax Credit in the case of Non-payment of Consideration
A Goods and services Tax Registered person, who has availed of ITC on any inward supply of services or goods or both, but still not able to pay the supplier thereof, Value of such supply along with tax payable thereon, within due date limit specified in the second proviso to U/s 16(2), shall file details of such supply, amount of value not paid & Amount of ITC availed of proportionate to such amount not paid to the supplier in FORM GSTR 2 for month immediately next period of 180 days from date of issue of GSTR invoice:
Provided that the value of supplies made without consideration as specified in Schedule I of the said Act shall be deemed to have been paid for the purposes of the second proviso to sub-section (2) of section 16.
GST Schedule I: Activity to be treated as supply even if made without consideration
Supply of services or goods or both between related persons or distinct persons as specified in u/s 25 f CGST Act, when made in course or furtherance of business: (ONE GSTN TO ANOTHER GSTN OF SAME LEGAL ENTITY)
So there is an exception to GST Rule 37, Non-reversal of ITC on A/c of outstanding within 180 days between related persons or distinct persons.
this view has been in favour of applicant in case of Senco Gold Ltd (AAR West Bengal) that there is no required to reverse Input tax credit for book adjustments & can be considered as payment for supplies made.
