Skip to content

CS Executive · Tax Laws and Practice · Input Tax Credit and Computation of GST Liability

Kapoor Ltd availed input tax credit of Rs 18,000 on an invoice for services, other than reverse charge supplies, issued by Rao Services on 1 March. Kapoor Ltd has not paid Rao Services the value of supply and tax within 180 days of the invoice date. Which statement is correct under the second and third provisos to section 16(2) of the CGST Act, 2017?

Kapoor Ltd must pay an amount equal to the Rs 18,000 credit with interest under section 50, as 180 days have passed without paying the supplier. The credit is not lost permanently; the third proviso allows it to be availed again once the supplier is paid.

  1. AKapoor Ltd must pay an amount equal to the credit availed, along with interest under section 50, and may re-avail it on paying the supplierCorrect
  2. BKapoor Ltd may retain the credit as the supplier has already filed its return
  3. CKapoor Ltd must reverse the credit but cannot re-avail it even after paying the supplier
  4. DKapoor Ltd need only pay the Rs 18,000 and no interest is attracted

Explanation

Under the second proviso, non-payment within 180 days of the invoice date requires the recipient to pay an amount equal to the credit availed, along with interest payable under section 50. The third proviso lets the recipient avail the credit again on paying the supplier. Retaining the credit, permanent loss of it, or no interest are all inconsistent with these provisos.

Did you get it right without looking?

One question tells you little. A timed set on Input Tax Credit and Computation of GST Liability shows your real accuracy, how long you take and where you lose marks.

Practise Input Tax Credit and Computation of GST LiabilityFree diagnostic mock

More Input Tax Credit and Computation of GST Liability questions