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CA Intermediate · Taxation · Input Tax Credit

Mehta Pharma Ltd received goods from a supplier on 10 June 2025 under an invoice dated 5 June 2025 with GST of Rs 50,000. Mehta has not paid the supplier by 31 March 2026 even though payment was due in 60 days under the terms. Which statement is correct as per the second proviso to section 16(2) of the CGST Act, assuming no payment is made before the date of the next return?

The Rs 50,000 credit must be added to output tax liability with interest because payment was not made within 180 days from the invoice date. The recipient may re-avail the credit later when the supplier is actually paid, so the loss is not permanent.

  1. AITC of Rs 50,000 must be added to output tax liability along with interest, and can be re-availed on paymentCorrect
  2. BITC remains available and need not be reversed as long as the invoice is on the GST portal
  3. CITC is permanently lost and cannot be re-availed even on payment
  4. DITC must be reversed only if the supplier is unregistered

Explanation

If the recipient does not pay the supplier within 180 days of the invoice date, the ITC availed must be paid back with interest. The 180 days from 5 June 2025 lapse in early December 2025, so reversal is required. The credit can be re-availed once the payment is made, so it is not permanently lost.

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