GST if Bad Debts happens : CBIC Clarify

By | June 4, 2018
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(Last Updated On: June 4, 2018)

Where GST is charged on a supply of  service and the amounts due from the customer become irrecoverable as a bad debt in commercial  practice, would such GST paid on  accrual basis be refundable to the service provider by the Government?

The adjustment of GST already paid is allowed only by way of issuance of credit  /debit note in terms of Section 34 of the CGST Act, 2017.

The proviso to section 34(2) of the CGST Act, 2017 provides that no reduction in liability would be allowed if the incidence of tax has been passed on to another person.

If bad  debts are on account of deficiency in supply of services, or tax charged being
greater than actual tax liability, or goods returned, GST paid on the same is refundable subject to fulfilment of the prescribed conditions.

Therefore, GST  already paid on bad debts, as used in the trade parlance, cannot be adjusted.


Q 48 of GST FAQs on Financial Services Sector published by CBIC

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tax deduction at source

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