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Value of supplyWhen tax payer failure to pay Value of supply to Vendor within a period of 6 month: The Second proviso to Section 16(2) read with Rule 37 of the GST Act, says 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 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 in the month immediately following the said period from the date of issue of invoice, along with interest thereon, by furnishing 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 issue of the invoice. However, the third proviso to Section 16(2) says that 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.

The proviso to Rule 37 says 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 Section 16(2).

Further, as per Rule 37(3), the interest on such tax shall be liable to be paid at the rate notified vide Notification No. 13/2017-Central Tax Dated 28-Jun-17 at the rate of 18% for the period starting from the date of availing credit on such supplies till the date of payment of output tax liability added.

Case I: Shanti Infotech Ltd., a registered firm under GST, has purchased Canon, Apple Mobile, Lenovo Tablets (input goods)  of Rs.5,00,000/- (excluding tax applicable @ 18%) on 15th July 2017 from Avon Computers Ltd. and claimed ITC (Input Tax Credit) accordingly while filing the return for the month. Payment of such input goods purchased is not made up to 11th January 2018 to Avon Computers Ltd. (i.e. 180 days from the date of issue of invoice).

Now, as per the second proviso to Section 16(2), an amount equal to ITC on such input goods i.e. Rs.90,000/- (Rs.5,00,000 × 18%) shall be added to the output tax liability, along with interest, while filing the return for the month of February.



Case II: If in above case, Shanti Infotech Ltd. pays the full amount i.e. Rs. 5,90,000/- to the Avon Computers Ltd on 25th February 2018, then what will be the situation?

As per the third proviso to Section 16(2), Shanti Infotech Ltd. shall be entitled to avail the input tax credit of Rs. 90,000/- while filing the return for the month of February.

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One thought on “Input Tax Credit on Failure to pay Value of supply

  1. Vineet Gandhi says:

    How GSTN will keep track of payment. As there is form or table to declar payment information on GSTN portal

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