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CS Professional · Goods and Services Tax (GST) and Corporate Tax Planning · Input Tax Credit and Computation of GST Liability

Gupta Pvt Ltd, a registered person, purchased goods from a registered supplier on 1 April 2026 under an invoice of ₹1,00,000 plus GST of ₹18,000, and has availed the credit of ₹18,000. It does not pay the supplier anything by 28 September 2026, which is more than 180 days after the invoice date. The supply is not under reverse charge. What must Gupta do under the second proviso to section 16(2)?

Gupta must pay an amount equal to the credit availed, ₹18,000, along with interest under section 50. The second proviso to section 16(2) requires this when the supplier is not paid value and tax within 180 days of the invoice, except for reverse charge supplies.

  1. APay the supplier ₹1,18,000 and take no action on the credit
  2. BReverse nothing, as the time limit applies only to services
  3. CPay an amount equal to ₹18,000 along with interest under section 50Correct
  4. DPay ₹1,18,000 to the Government as penalty

Explanation

The second proviso provides that if the recipient fails to pay the supplier the value plus tax within 180 days from the invoice date, an amount equal to the credit availed must be paid by him along with interest under section 50. Here the credit is ₹18,000. The proviso covers goods or services, so the services-only option is wrong. No penalty of the full invoice value is prescribed.

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