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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 answer of these MCQs shall be posted next day for the self assessment of the participants.

MCQ 54.1: A sells goods to B and issues 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 ltd 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 to deposit GST under reverse charge since the transaction is without consideration.
B) X ltd need to deposit GST under reverse charge and he cannot take credit of same since he is not required to made any payment within 180 days.
C) X ltd need 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 made any payment within 180 days .
D) X ltd need to deposit GST under reverse charge and he can take credit of same but the same has to be reversed after 180 days.

Have a Nice Day!

Sincere Regards
CA Sanjay Kumar Agrawal
Mobile: 9810116321

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————Answer MCQ Self Challenge # 0054————

 

Dear Professional Seniors & Friends,

Warm Greetings!

 

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

 

Answer to MCQ 54.1: C) ITC on Rs 800 will be reversed.

 

Answer to MCQ 54.2: C) X ltd need 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 made any payment within 180 days.

 

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 invoice, 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 in relation to supply but which has been incurred by the recipient of the supply, shall be included for the purpose of valuation.
  3. The Central Government vide Notification No. 46 /20/2018 –GST dated 13th June, 2018 has inserted new proviso in Rule 37 has been inserted to provide that that the value of supplies on account of any amount added in accordance with the provisions of clause (b) of 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 in relation to 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 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.

 

Practical Analysis for MCQ 54.2 :-

  1. Schedule I of CGST Act specifies the activities to be treated as supply even if made without consideration.
  2. As per that schedule, Import of services by a taxable person from a related person or from 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 recipient is liable to pay tax under reverse charge. As per that notification, in case of import, recipient is liable to pay tax under reverse charge.
  4. As per first proviso to Rule 37 of CGST Rules, value of supplies made without consideration as specified in Schedule I of CGST Act shall be deemed to have been paid for the purpose of reversal of ITC on account of non payment within 180 days.
  5. It means that section 16(2) of CGST Act has no impact on activities specified under Schedule I and there is no requirement of reversal of ITC in these cases due to non payment within 180 days.

 

Based on the above analysis, correct answer MCQ 54.2: C) X ltd need 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 made 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 professional opinion; you can definitely have your own opinion.)

 

Sincere Regards!

CA Sanjay Kumar Agrawal

Mobile: 9810116321

To access MCQ posts regularly, please Join Telegram Channel:
https://t.me/caSanjayKumarAgrawal

 

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