23-Nov-2021 Reversal of IGST Credit because of Non-Payment of Invoice Value Within 180 Days to the Vendor

An Indian Company procured goods from the vendor and availed credit in relation to the same. Subsequently, the Vendor has passed post supply discount via Credit Note and hence the Company did not make full payment of the invoice to the vendor. The Company approached our team regarding advice in respect of reversal of input tax credit as per the proviso to Section 16(2) of Central Goods and Services Tax Act, 2017 (‘GST Act’) since the Company did not made the payment of goods due to post supply discount provided by the Vendor.

Our dedicated team of GST Experts studied the issue in detail and advised them regarding the admissibility of input tax credit in case if full payment of invoice is not made within 180 days (as per proviso to Section 16(2) of the GST Act) due to post supply discount provided by the Vendor. In the instant case, based on the facts of the case and documentation, we opined that input tax credit need not be reversed. We provided the solution after examining various provisions of the GST law along with the Advance Rulings issued by the Government in relation to the said query and ensured that the Company complied with all the provisions of the GST Act. The eligibility of input tax credit will differ from company to company based on the facts of the case.