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Reversing Input Tax Credit – Non-payment of Invoice


Reversing Input Tax Credit – Non-payment of Invoice

GST invoices should be issued when goods or services have been delivered to the customer and payment is reasonably assured. On raising the tax invoice, the supplier would be required to disclose the sale in the monthly GSTR-1 filing and pay the GST tax payable to the Government, even if the customer has not made the payment on the invoice.

Pre-Requisites to Claim Input Tax Credit

A registered person must fulfil the following criteria to claim input tax credit:

  • The registered person must possess a copy of the GST invoice or debit note which was issued by the supplier, or some other documents as prescribed.
  • The registered person must have received the goods or services for which Input Tax Credit is being claimed.
  • The tax charged with respect to such supplies has been actually paid to the Government, either in cash or through the utilization of Input Tax Credit admissible in respect of the supply made.
  • The registered person should have filed the GST returns.

Reversing Input Tax Credit

In some cases, the customer of goods or service might fail to make the payment on the invoice. In such cases, the supplier can take the following steps to reverse the input tax credit enjoyed by the recipient without making payment.

Step 1: Intimate the Customer

Though the supplier is not required to provide any intimation to the customer before reversing input tax credit, the supplier may provide as good practice by making a written request to the customer for making payment on the overdue-invoice.

Click here to read on GST Input Tax Credit Scheme-For Existing Stock

Step 2: File GSTR-2

While filing the GSTR-2 return on or before the 15th of a month, the supplier can mention the details of invoices for which payment was not received along with GSTIN of the customer. To reverse input tax credit, the following information pertaining to the transaction must be provided in the GSTR-2 filing:

  • GSTIN of customer
  • Invoice number
  • Amount not paid
  • Amount of input tax credit availed

The taxpayer shall file the GSTR-2 returns within 180 days from the date of issue of invoice for reversal of input tax credit.

Step 3: Reversal of Input Tax Credit

After filing GSTR-2 returns, the portal adds the amount of input tax credit availed by the customer to the output tax liability for the month as per the details furnished. The customer shall then pay the liable interest amount for the wrongly availed input tax credit from the period starting from the date of availing credit till the date when the amount as added to the output tax liability.

Click here for GST registration or GST return filing