Before the roll out of GST, it was notified that once the GST comes into the picture, in case of supply (be its goods or services), the payment has to be made within a period of 180 days from the date of invoice.

Let us understand further with an example:

Mr. A (registered person) purchased goods from Mr. B on credit worth Rs. 1000/- on 15th July 2017 and assuming the tax rate on such goods to be 18% , the CGST and SGST amount comes out to be Rs. 90/- each and the total invoice value is Rs. 1180/-.Now according to the provisions, Mr. A must pay the invoice value to Mr. B within 180 days from the date of invoice i.e. maximum by 11th Jan 2018 or else the credit availed earlier shall be reversed along with interest till the payment is not made. Now as per ITC Rules of the Central Goods and Services Tax (CGST) Rules, 2017 explains that the interest at the rate of 18% is to levied on Rs. 180/- from the date of availing of credit of Rs. 180/- in GSTR-2 for the month of July 2017 till such the input tax reversal is added to the output tax liability for the month of January 2018.

Let’s analyse further with the help of FAQs.

Ques. 1 From which date this provision shall become operative??

Ans. From 1st July, 2017.

Ques. 2 What if supply has been made without consideration??

Ans. If the value of supplies made without consideration, it shall be deemed to have been paid. In other words, the concept of reversal of ITC shall not comes into the picture.

Ques. 3 What if payment is not made within 180 days of invoice??

Ans. If payment is not made (in full or part) within the span of 180 days of issuing invoice, then the amount of Input Tax credit availed (in part or full) shall be reversed, shall be added to the output tax liability ledger for the month in which the details are furnished after the expiry of 180 days and interest shall also be paid on the value of ITC reversed at the rate of 18%.

Ques. 4 What is the time period for calculating interest??

Ans. Interest shall be calculated for the number of days commencing form the date of availing ITC in the books of accounts till the date of adding the ITC to the output tax liability ledger.

Ques. 5 What would happen if the payment is made after reversal of availed ITC??

Ans. If the payment is made after the reversal of availed ITC, then it can be availed as credit again. However, the interest paid shall be cost.  

Author: C S Ekta Maheshwari is the Author of this article and is a Practicing Company Secretary. The Author can be reached at pcs.ekta@gmail.com  for further assistance/query, specimen of forms etc.

Disclaimer: The entire contents of this article is solely for information purpose and have been prepared on the basis of relevant provisions and as per the information existing at the time of the preparation.. It doesn’t constitute professional advice or a formal recommendation. The author has undertook utmost care to disseminate the true and correct view and doesn’t accept liability for any errors or omissions. You are kindly requested to verify & confirm the updates from the genuine sources before acting on any of the information’s provided herein above.

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6 responses to “FAQs on Reversal of ITC when Payment is not made Within 180 Days”

  1. Rajendra says:

    suppose invoice date is 15.07.17 and we accounted it in our books on 15.12.17 and take credit of GST in Dec GSTR-3B. In this situation interest is to be calculated from 15.07.17 or 15.12.17?

  2. ANKESH BHARGAVA says:

    Suppose we have made payment of Rs. 600 out of Rs. 1180 within the stipulated period of 180 days ,then how much input credit we have to reverse and the amount on interest we paid thereupon

  3. Dinesh Bapat says:

    Supplier A (Maharashtra) provides services to Unit of B Co Pvt Ltd situated in Karnataka and also procures (Supplier A) some material from B Co Pvt Ltd (Maharashtra). If we adjust the liability of Unit of B Ltd Karnataka against receivables from Supplier A in B Co Pvt Ltd, then will it be treated as payment of invoice from Unit of B Co Pvt Ltd Karnataka.

  4. CA Anita Bhadra says:

    Good Article

    Refer Q3 – payment is not made (in full or part)
    What does it mean – Full or Part .

    Kindly elaborate

  5. Rajkumar says:

    Credit term is more than 6 months what would be the case.

  6. Maruthakumar says:

    VERY GOOD PRESENTATION

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