Second & third proviso to Section 16(2), of the Central Goods & Services Tax (CGST) Act, 2017 provides for reversal and reavailment of ITC on account of non-payment. Same is reproduced below for ready reference:

Second Proviso to Section 16(2) :- “Provided further that where a recipient fails to pay to the supplier of goods or services or both, other than the supplies on which tax is payable on reverse charge basis, 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 by the supplier, an amount equal to the input tax credit availed by the recipient shall be added to his output tax liability, along with interest thereon, in such manner as may be prescribed :

Provided also that the recipient shall be entitled to avail of the credit of input tax on payment made by him of the amount towards the value of supply of goods or services or both along with tax payable thereon.”
Further Rule 37 prescribes the mechanism for implementing the above referred provisions. Said rule is also reproduced below:

“RULE 37. Reversal of input tax credit in the case of non-payment of consideration. —

(1) A registered person, who has availed of input tax credit on any inward supply of goods or services or both, but fails to pay to the supplier thereof, the value of such supply along with the tax payable thereon, within the time limit specified in the second proviso to sub-section (2) of section 16, shall furnish the details of such supply, the amount of value not paid and the amount of input tax credit availed of proportionate to such amount not paid to the supplier in FORM GSTR-2 for the month immediately following the period of one hundred and eighty days from the date of the issue of the invoice :

Provided that the value of supplies made without consideration as specified in Schedule I of the said Act shall be deemed to have been paid for the purposes of the second proviso to sub-section (2) of section 16.

(2) The amount of input tax credit referred to in sub-rule (1) shall be added to the output tax liability of the registered person for the month in which the details are furnished.

(3) The registered person shall be liable to pay interest at the rate notified under sub-section (1) of section 50 for the period starting from the date of availing credit on such supplies till the date when the amount added to the output tax liability, as mentioned in sub-rule (2), is paid.

(4) The time limit specified in sub-section (4) of section 16 shall not apply to a claim for re-availing of any credit, in accordance with the provisions of the Act or the provisions of this Chapter, that had been reversed”

For Example: Mr A purchased goods and /or availed services worth Rs 1,18,000 (1,00,000+ 18000 GST) from Mr. Y on 01 Mar 2019 and received invoice on the same date and avail the credit in the month of Mar 2019. He paid to Mr Y against this bill on 01.12.2019. 180 days from the date of invoice is 30th Aug 2019. Since he has not paid to the supplier in 180 days , Rs 18000/- shall be added in his outward liability in GSTR 3B for the month of Sep 2019 along with interest @18% calculated from the date of ITC availed ie 01.03 .2019 to the date of payment 01.12.2019

Name: Abhay Desai