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

Ruchi Traders reversed credit under Section 41(2) because its supplier had not paid the tax. The supplier later pays the tax payable on those supplies. What is the position under the proviso to Section 41(2)?

The registered person may re-avail the reversed amount of credit in the prescribed manner once the supplier pays the tax payable on the supplies. The proviso to Section 41(2) thus restores the credit; it is neither permanently lost nor limited to a refund.

  1. AThe credit is permanently lost
  2. BThe credit may be re-availed only after the Appellate Tribunal permits it
  3. CThe registered person may re-avail the reversed credit in the prescribed mannerCorrect
  4. DThe registered person may claim only a cash refund of the reversed credit

Explanation

The proviso to Section 41(2) allows the recipient to re-avail the credit reversed in the prescribed manner once the supplier pays the tax payable on the supplies. It does not make the loss permanent or require tribunal permission or a refund.

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