Question

Please guide with the provision of GST law, we have not made payments to our creditors and having payable some rupee for more then 180days (6month), Now,

1) Whether we have to reverse ITC? if yes,
2) Than whether we have to pay interest on it? if yes,
3) Than on which percentage we have to reverse?

Also give example calculation of it.
 

Answer

Facts of the case:
Payment was not made to creditors within 180 days but ITC was booked when the purchases were made.

Law Applicable:
As per 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 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"

Interpretation:
If the payment is not made to supplier within 180 days then ITC shall be reversed with interest thereon. To illustrate;
Purchase of 10,000 (GST there on @18% = 1800) was made on 1.04.2019 and payment was not made in 180days. Then on expiry of 180 days following amount shall be added to output tax liability;
1800 + Interest u/s 50 @18% for 180 days = 159.78
Total of 1960 shall be added to output tax liability.

Conclusion:
ITC credited at the time of purchase and interest thereon shall be added to output tax liability if payment is not made within 180 days. (Reply dt. 22/04/2019)