No need to Reverse Input Tax Credit for non payment if recipient Supplied Material to Supplier
Summary
Section 16 of CGST Act 2017 deals with Eligibility and condition for taking input tax credit.
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second proviso to sub-section (2) of section 16 says :-
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:
Comment : second proviso to sub-section (2) of section 16 says that if recipient does not pay to supplier within 180 days from the date of issue of invoice by the supplier then amount equal to the input tax credit availed by the recipient shall be added to his output tax liability, along with interest
Rule 37 of CGST Rules deals with Reversal of input tax credit in the case of non-payment of consideration
Section 15 of CGST Act deals with Value of taxable supply
Section 15(2) of CGST Act Says
(2) The value of supply shall include—
| (b) | any amount that the supplier is liable to pay in relation to such supply but which has been incurred by the recipient of the supply and not included in the price actually paid or payable for the goods or services or both; |
As per Notification No 26/2018 Central Tax Dated 14.06.2018 : CGST (Fifth Amendment) Rules 2018 Govt has amended Rule 37 of CGST Rules 2017
(i) in rule 37, in sub-rule (1), after the proviso, the following proviso shall be inserted, namely:-
“Provided further that the value of supplies on account of any amount added in accordance with the provisions of clause (b) of sub-section (2) of section 15 shall be deemed to have been paid for the purposes of the second proviso to sub-section (2) of section 16.”;
Comment : If recipient of the supply incurred expenses on behalf of supplier , then No need to reverse Input Tax Credit due to non payment , as it will be assumed that this amount has been paid by the recipient to the supplier.