(E) Reversal of input tax credit if payment for the invoice is not made within 180 days from the date of issue of invoice [Second Proviso to Section 16(2)]
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 180 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 below :
It may be noted that the above condition of payment of the value of supply within 180 days does not apply in the following two cases:
(a) In case of supplies on which tax is payable by the recipient under the Reverse Charge Basis;
(b) deemed supplies made without consideration
Reversal of Input Tax Credit (ITC) in the case of Non-Payment of Consideration (Rule 37]
(1) A registered person. who has availed of input tax credit on any inward supply of goods or services or both, but fails to pay to the supplier thereof the value of such supply along with the tax payable thereon within the time limit specified in the second proviso to section 16(2) (i.e. 180 days from the date of issue of invoice by the supplier), shall furnish the details of such supply, the amount of value not paid and the amount of input tax credit availed of proportionate to such amount not paid to the supplier in FORM GSTR-2 for the month immediately following the period of 180 days from the date of the issue of the 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 deemed supply mentioned under clause (b) above.
Provided further that the value of supplies on account of any amount added in accordance with the provisions of section 15(2)(b) shall be deemed to have been paid for the purposes of the deemed supply mentioned under clause (b) above.
(2) The amount of input tax credit referred to in rule 37(1) shall be added to the output tax liability of the registered person for the month in which the details are furnished.
(3) The registered person shall be liable to pay interest at the rate not exceeding 18% as notified under section 50(1) for the period starting from the date of availing credit on such supplies till the date when the amount added to the output tax liability, as mentioned in rule 37(2), is paid. |
(F) Re-availment of Input Tax Credit (ITC) after Reversal under Second Proviso to Section 16(2) [Third Proviso to Section 16(2)]
After reversal of input tax credit as per second proviso to section 16(2) (see above), the recipient shall be entitled to avail of the credit of input tax on payment made by him of the amount towards the value of supply of goods or services or both along with tax payable thereon. Further, in case part payment is made, ITC would be allowed proportionately. [See also Rule 37(4)]
The time limit specified in section 16(4) shall not apply to a claim for re-availing of any credit, in accordance with the provisions of the Act or the provisions of this Chapter. that had been reversed earlier. [Rule 37(4)]
Illustration-1
Mr. Dust, recipient of specified goods submit the following information:
| Date of invoice |
10.8.2017 |
|
(Rs.) |
Value of specified goods |
5,00,000 |
Central Tax i.e. CGST charged on above @ 9% |
45,000 |
State Tax i.e. SGST charged on the above 9% |
45,000 |
Total |
5,90,000 |
Mr. Dust does not make payment of Rs 5,90,000 till 6.2.2018.
Determine how much amount of input tax credit will be added to the output tax liability.
Solution
Since the payment has not been made within 180 days from the date of issue of invoice by the supplier, ITC of Rs. 90,000 on account of above-mentioned Central Tax and State Tax shall be added to the output tax liability of Mr. Dust along with interest thereon from the date of claim of credit.
(G) No Input Tax Credit will be allowed if depreciation is claimed on the tax component of the cost of capital goods [Section 16(3)]
Where the registered person has claimed depreciation on the tax component of the cost of capital goods and plant and machinery under the provisions of the Income-tax Act, 1961, the input tax credit on the said tax component shall not be allowed.
(H) Time Limit for availing Input Tax Credit (ITC) [Section 16(4)]
A registered person shall not be entitled to take input tax credit in respect of any invoice or debit note for supply of goods or services or both after—
— the due date of furnishing of the return under section 39 for the month of September following the end of financial year to which such invoice or invoice relating to such debit note pertains.
or
— furnishing of the relevant annual return,
whichever is earlier.
In other words, time limit for taking availing ITC in respect of any invoice or debit note for supply of goods or services or both shall be earlier of:
(i) Due date of furnishing of Return under section 39(1) for the month of September following the end of the financial year to which such invoice or invoice relating to such debit note pertains; or
(ii) Date of furnishing of Annual Return.
As per section 39(1), due date for filing of return for every calendar month is 20 days after the end of the calendar month
In terms of section 44(1), Annual Return for every financial year is to be furnished on or before the 31St December following the end of such financial year.
It may be noted that the return for the month of September is to be filed by 20th October and annual return of a financial year is to be tiled by 31st December of the succeeding financial year.
Therefore, the time limit for taking ITC is 20th October of the next financial year or the actual date of filing of annual return, whichever is earlier. The underlying reasoning for this restriction is that no change in return is permitted after September of next financial year. If annual return is filed before the month of September, then no change can be made after filing of annual return.
Exception
The time limit u/s 16(4) does not apply to claim for re-availing of credit that had been reversed earlier under second proviso to section 16(2) (i.e. which has been reversed after a period of 180 days from the date of issue of invoice by the supplier due to non-payment to the supplier).
Illustration :
| (a) Date of Invoice for supply of goods |
18.10.2017 |
(b) Due date of furnishing return for the month of September 2018 |
20.10.2018 |
(c) Annual Return for the year 2017-18 furnished on |
24.12.2018 |
(i) Determine the time limit for availing input tax credit.
(ii) What will be the answer if the annual return is furnished on 15.10.2018
Solution (i) :
Time Limit for taking ITC in respect of invoior dated 18.10.2017 shall be earlier of the following two dates:
(a) 20.10.2018 or(b)24.12.20l8 i.e. it will be 20.10.2018
Solution (ii) :
Time Limit for taking ITC in respect of invoice dated 18.10.2017 shall be earlier of the following two dates:
(a) 20.10.2018 or(b) 15.10.2018 i.e. it will be 15.10.2018 |
