In the 45th GST Council meeting held on 17th September 2021, it was announced that a new provision would be introduced, with effect from 1st October 2022, for the reversal of Input Tax Credit (ITC) in case of non-payment of consideration within 180 days.
According to the new provision, if a registered person fails to pay the consideration for the supply of goods or services within 180 days from the date of issue of invoice, the recipient of the goods or services would be required to reverse the ITC availed on such supplies.
This means that if a supplier has not been paid for a supply of goods or services, the recipient of the goods or services will not be able to claim ITC for the tax paid on such supplies. The recipient will have to reverse the ITC already claimed, along with interest.
However, if the recipient makes the payment for the supply of goods or services within 180 days of the date of issue of the invoice, they will be able to claim the ITC again.
This new provision is intended to ensure that the ITC is claimed only for genuine business transactions and to discourage the practice of availing ITC fraudulently. It is also expected to encourage prompt payment of consideration for supplies of goods or services.
It is important for businesses to be aware of this provision and to ensure that they make payment for the supplies of goods or services within 180 days to avoid the reversal of ITC.
The 45th GST Council meeting held on 17th September 2021 introduced a new provision for the reversal of Input Tax Credit (ITC) in case of non-payment of consideration within 180 days. According to this provision, if a registered person fails to pay the consideration for the supply of goods or services within 180 days from the date of issue of the invoice, the recipient of the goods or services would be required to reverse the ITC availed on such supplies.
This means that if a supplier has not been paid for a supply of goods or services, the recipient of the goods or services will not be able to claim ITC for the tax paid on such supplies. The recipient will have to reverse the ITC already claimed, along with interest.
However, if the recipient makes the payment for the supply of goods or services within 180 days of the date of issue of the invoice, they will be able to claim the ITC again.
The purpose of this provision is to ensure that the ITC is claimed only for genuine business transactions and to discourage the practice of availing ITC fraudulently. It is also expected to encourage prompt payment of consideration for supplies of goods or services.
It is important for businesses to be aware of this provision and to ensure timely payment for the supplies of goods or services to avoid any adverse impact on their ITC. This provision will be applicable from 1st October 2022.
The purpose of the new provision for the reversal of Input Tax Credit (ITC) in case of non-payment of consideration within 180 days is to ensure that the ITC is claimed only for genuine business transactions and to discourage the practice of availing ITC fraudulently.
In the past, some businesses have taken advantage of the ITC system by fraudulently claiming ITC for transactions that did not involve genuine business activities. This has resulted in revenue losses for the government and has undermined the integrity of the GST system.
The new provision is intended to discourage such practices and to promote the use of ITC for legitimate business activities only. By requiring the reversal of ITC in case of non-payment of consideration within 180 days, businesses will have to ensure that they only claim ITC for transactions that are supported by actual payments.
Additionally, the new provision is also expected to encourage prompt payment of consideration for supplies of goods or services. By making it clear that ITC can only be claimed if payment is made within 180 days, businesses will have an incentive to make timely payments for the goods or services they receive.
Overall, the purpose of the new provision for the reversal of ITC is to strengthen the GST system and to promote genuine business activities.
A: According to the new provision, if a registered person fails to pay the consideration for the supply of goods or services within 180 days from the date of issue of invoice, the recipient of the goods or services would be required to reverse the ITC availed on such supplies.
A: The new provision will be applicable from 1st October 2022.
A: If the recipient makes the payment after 180 days, they will not be able to claim ITC for the tax paid on such supplies. The recipient will have to reverse the ITC already claimed, along with interest.
A: Yes, if the recipient makes the payment for the supply of goods or services within 180 days of the date of issue of the invoice, they will be able to claim the ITC again.
A: The new provision is intended to ensure that the ITC is claimed only for genuine business transactions and to discourage the practice of availing ITC fraudulently. It is also expected to encourage prompt payment of consideration for supplies of goods or services.
A: Businesses can avoid the reversal of ITC by making payment for the supplies of goods or services within 180 days. It is important for businesses to be aware of this provision and to ensure timely payment to avoid any adverse impact on their ITC.
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