Practical GST Guide

Credit reversal when supplier payment is delayed

The payment-to-supplier condition can require reversal of input tax credit where the recipient fails to pay the supplier the value of the supply plus tax within the prescribed period, subject to the applicable statutory conditions and exceptions. When payment is subsequently made, the credit may become available again subject to the law.

What this means: A good control is to connect the purchase register, creditor ageing and ITC ledger. The team should identify invoices approaching the statutory payment period, calculate the credit affected and document the reversal/reclaim movement.

Key points

Understand the transaction before applying the tax treatment.
Check the applicable section, rule and tax-period-specific changes.
Match the accounting entry with the GST return and supporting documents.
Document the judgement where the treatment depends on facts or contractual terms.

Practical example

Example: An invoice remains unpaid beyond the prescribed period. The finance team identifies the linked ITC, records the required reversal in the return working, and when the supplier is paid, checks the conditions for re-availment.

Practical checklist

Identify the transaction and tax period
Check the applicable law and connected rules
Verify invoices, agreements, ledgers and portal data
Reconcile the working with the relevant return
Retain the final working and supporting evidence

The content is for general knowledge and educational purposes. Verify the law, rules, notifications and circulars applicable to the relevant tax period before taking any action. It is not a substitute for professional advice.

Reference note: Prepared using GST statutory material and professional GST study material for knowledge purposes.