Under the GST regime, taxpayers are required to reverse the Input Tax Credit (ITC) availed on any input, input service or capital goods in certain situations, such as where the goods or services are used for non-business purposes or where the recipient has not paid the invoice amount to the supplier within 180 days from the date of invoice.
If the taxpayer does not reverse the ITC within the stipulated time, they are liable to pay interest at the rate of 18% per annum, calculated from the date of availing the ITC till the date of its reversal.
In the case of 180-day reversals, the interest is calculated from the date of availing the credit till the 180th day from the date of the invoice. If the credit is not reversed within 180 days, interest will be charged from the date of the invoice till the date of reversal. The interest amount is to be calculated separately for each tax period and added to the tax liability.
It is important for taxpayers to ensure timely reversal of ITC to avoid the payment of interest and penalties under GST.
The interest rate for the late payment of Input Tax Credit (ITC) due to 180-days reversal is the same as the interest rate for the late payment of tax. As per the GST Act, the interest rate for delayed payment of tax is 18% per annum. Therefore, if a taxpayer fails to pay the reversed ITC amount within 180 days from the date of the invoice, he will be liable to pay interest at the rate of 18% per annum on the amount of ITC from the date of the ITC reversal till the date of payment. It is important to note that the interest rate is calculated on a monthly basis, and any part of the month is considered as a full month for the purpose of interest calculation.
1. What is 180-Days Reversal under GST?
In GST, a taxpayer is required to reverse the Input Tax Credit (ITC) availed on goods or services if the supplier fails to pay the tax collected on such supplies to the government. This is called reversal of ITC on account of non-payment of consideration. If the amount of tax paid by the supplier remains unpaid for a period of 180 days from the due date of payment, the ITC availed on such supplies needs to be reversed.
2. What is the interest rate for late payment of ITC due to 180-Days Reversal?
The interest rate for late payment of ITC due to 180-Days Reversal is 18% per annum. The interest is calculated from the date when the ITC was availed till the date when it was reversed.
3. When does the interest start accruing on the ITC availed?
The interest on the ITC availed starts accruing from the date when the ITC was availed, and not from the date when the supplier failed to pay the tax collected on such supplies.
4. Is interest payable even if the ITC is reversed within 180 days from the due date of payment?
No, interest is not payable if the ITC is reversed within 180 days from the due date of payment. However, if the ITC is reversed after 180 days, interest is payable at the rate of 18% per annum from the date when the ITC was availed till the date when it was reversed.
5. Can the interest be paid through the ITC available in the electronic credit ledger?
No, the interest cannot be paid through the ITC available in the electronic credit ledger. The interest needs to be paid in cash through the electronic cash ledger.
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