Where a recipient fails to pay the supplier the value of supply plus tax within 180 days from the invoice date, proportionate ITC may need to be reversed…
Where a recipient fails to pay the supplier the value of supply plus tax within 180 days from the invoice date, proportionate ITC may need to be reversed with interest under section 16(2) and Rule 37, subject to exclusions such as reverse-charge supplies and deemed-payment situations.
GST is levied on supply, not income. The second proviso to section 16(2) links ITC retention to payment of consideration and tax within 180 days. Rule 37 prescribes the reversal mechanism. For partial payment, reversal should be proportionate. Interest is computed under the current statutory rule from the prescribed starting point until reversal/payment, and the calculator must use the legally effective rate and period. Credit can generally be re-availed after payment to the supplier, subject to the rule. Reverse-charge supplies are outside this 180-day payment condition.
Invoice value is ₹1,00,000 plus GST of ₹18,000. The recipient pays ₹59,000, representing half the gross invoice, within 180 days and leaves half unpaid. Subject to allocation and Rule 37, ₹9,000 ITC may require reversal. The calculator should separately show ITC reversed, interest period and later re-availment after payment.
See the broader GST & Indirect Tax knowledge hub for related rules and calculators on this topic.
Where a recipient fails to pay the supplier the value of supply plus tax within 180 days from the invoice date, proportionate ITC may need to be reversed with interest under section 16(2) and Rule 37, subject to exclusions such as reverse-charge supplies and deemed-payment situations.
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