A Detailed Study Of GST ITC Reversal - DSRV India

MCQ SELF CHALLENGE # 0054 ON GST ITC REVERSAL

Reversal of ITC on Account of non-Payment

Dear Professional Seniors & Friends,

Warm Greetings!

Here is the Next post of #MCQ on concept-based practical professional knowledge on reversal of ITC on account of non-payment within 180 days in a unique manner to be self-answered by participants. The detailed answers to these MCQs shall be posted the next day for the self-assessment of the participants.

MCQ 54.1: A sells goods to B and issues an invoice of Rs 1000. B paid Rs 200 for freight on behalf of A. B did not pay the A Rs 1000 within 180 days.

A) ITC on Rs 1000 will be reversed.

B)ITC on Rs 200 will be reversed.

C) ITC on Rs 800 will be reversed.

D) No ITC is required to be reversed.

MCQ 54.2: X Itd import services from a related person outside India without consideration. but in the course of furtherance of business.

Which of the following is correct?

A) X Ltd need not deposit GST under reverse charge since the transaction is without consideration.

B) X Itd needs to deposit GST under reverse charge and he cannot take credit for the same since he is not required to make any payment within 180 days.

C) X Ltd needs to deposit GST under reverse charge and he can take credit of same and the same need not be reversed notwithstanding he is not required to make any payment within 180 days.

D) X Ltd needs to deposit GST under reverse charge and he can take credit for the same but the same has to be reversed after 180 days.

Answer MCQ Self Challenge # 0054

This post of MCQ is on provisions relating to the reversal of ITC on account of non-payment within 180 days.

Answer to MCQ 54.1:

C) ITC on Rs 800 will be reversed.

Practical Analysis for MCQ 54.1:

1. As per Section 16(2) of CGST Act read with Rule 37 of CGST Rules, any person who has claimed input tax credit and the recipient fails to

pay to the supplier the amount towards the value of supply along with tax payable thereon within a period of one hundred and eighty days

from the date of issue of the invoice, the input tax credit claimed earlier shall be required to be reversed.

2. As per Section 15(2)(b) any amount that the supplier is liable to pay about supply but which has been incurred by the recipient of

the supply shall be included in valuation.

3. The Central Government vide Notification No. 46/20/2018 ~GST dated 13th June 2018 has inserted a new proviso in Rule 37 has been

inserted to provide that the value of supplies on account of any amount added following the provisions of clause (b) of the sub-

section (2) of section 15 shall be deemed to have been paid for the purposes of the: second proviso to sub-section (2) of section 16.

4. With the insertion of this proviso any amount that the supplier is liable to pay concerning supply but which has been incurred by the

recipient of the supply and not included in the price actually paid or payable for the goods or services or both shall be deemed to have

been paid and no reversal of input tax credit on such amount is required (to be made in case the recipient fails to pay to the supplier the

amount towards the value of supply along with tax payable thereon within a period of one hundred and eighty days from the date of issue

of invoice.

Based on the above analysis, correct answer MCQ 54.1: C) ITC on Rs 800 will be reversed since on Rs 200, no ITC is required to be reversed.

Answer to MCQ 54.2:

C) X Ltd needs to deposit GST under reverse charge and he can take credit of same and the same need not be reversed notwithstanding he is not required to make any payment within 180 days.

Practical Analysis for MCQ 54.2:~

1. The schedule | of the CGST Act specifies the activities to be treated as supply even if made without consideration.

2. As per that schedule, the Import of services by a taxable person from a related person or any of his other establishments outside India,

in the course or furtherance of business even made without consideration shall be deemed to be supply.

3. Also Notification No. 10/2017 ~ Integrated Tax Rate specifies the case in which the recipient is liable to pay tax under reverse charge. As per

that notification, in the case of import, the recipient is liable to pay tax under reverse charge.

4. As per the first proviso to Rule 37 of CGST Rules. value of supplies made without consideration as specified in Schedule | of CGST Act shall

be deemed to have been paid for reversal of ITC on account of nonpayment within 180 days.

5. It means that section 16(2) of the CGST Act has no impact on activities specified under Schedule | and there is no requirement for reversal of

ITC in these cases due to non-payment within 180 days.

Based on the above analysis, the correct answer MCQ 54.2: C)X Ltd needs to deposit GST under reverse charge and he can take credit for same and

the same need not be reversed notwithstanding he is not required to make any payment within 180 days.

(Disclaimer: The objective of the MCQ post is just to discuss the concept. it may happen, by change of facts, the answer may be different.

Please do not treat this as a professional opinion; you can definitely have your own opinion.)

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Sincere Regards!

CA sanjay Kumar Agrawal

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