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CMA Intermediate · Direct and Indirect Taxation · Input Tax Credit

Mehta Ltd received an invoice dated 1 June 2026 for services of Rs 2,00,000 plus IGST of Rs 36,000 (not reverse charge) and took the credit. It had paid nothing to the supplier by 28 November 2026, which is beyond 180 days from the invoice date. What must it do under the CGST Act?

Mehta Ltd must pay an amount equal to the Rs 36,000 credit availed, together with interest under section 50, because it did not pay the supplier within 180 days. It can avail the credit again once it pays the supplier.

  1. ANothing, as credit once taken is never reversed
  2. BPay an amount equal to Rs 36,000 credit availed along with interest under section 50, and it may re-avail on payment to the supplierCorrect
  3. CReverse only the interest component and retain the credit
  4. DPay Rs 2,36,000 as penalty to the Government

Explanation

The second proviso requires that if the recipient does not pay the value plus tax within 180 days from the invoice date, an amount equal to the credit availed is paid by him along with interest under section 50. The third proviso lets him avail the credit again on payment to the supplier. No penalty of Rs 2,36,000 is provided.

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