Page 5 - Chap7 ITC

02: Rule 37A: Reversal of ITC in case of non-payment of consideration

Q.3
XYZ Pvt. Ltd., a registered person under GST, is engaged in the business of trading electrical
components. The company regularly procures goods from its supplier, ABC Traders.
In the month of October 20XX, XYZ Pvt. Ltd. received goods and a corresponding tax invoice for ₹ 1,00,000 +
₹ 18,000 GST from ABC Traders. ABC Traders uploaded the invoice details in their GSTR-1 for October
20XX. Based on this, XYZ Pvt. Ltd. availed the ITC of ₹ 18,000 in their GSTR-3B filed for the same month.
However, due to internal issues, ABC Traders did not file their GSTR-3B return for October 20XX, and as a
result, the tax liability corresponding to the invoice was not discharged by them. Based on above, Answer the
following questions:
1. Whether XYZ Pvt. Ltd. was required to reverse the ITC of ₹ 18,000 under Rule 37A? Why or why not?
2. What are the consequences for XYZ Pvt. Ltd. for failing to reverse the ITC by 30th November 20YY, as per
Rule 37A?
3. If ABC Traders subsequently files their pending GSTR-3B for October 2023 in December 20YY, can XYZ
Pvt. Ltd. re-avail the ITC? If yes, under what conditions?
4. What interest liability, if any, arises for XYZ Pvt. Ltd. for not reversing the ITC within the prescribed
time?
Answer: Legal Provision:
Ü As per Rule 37A, If a registered person takes ITC based on an invoice/debit note that the supplier has shown in
GSTR-1/IFF, but the supplier does not file GSTR-3B by 30th September following the end of that financial
year, then the recipient must reverse that ITC in their GSTR-3B by 30th November of the next financial year.
Ü If the recipient does not reverse it in time, they have to pay the amount with interest.
Ü Later, if the supplier files their GSTR-3B, the recipient can re-avail (take back) the ITC in any future GSTR-3B
return.
Conclusion:
1. Yes, XYZ Pvt. Ltd. was required to reverse the ITC under Rule 37A because the supplier (ABC Traders)
failed to file GSTR-3B by 30th September 20YY.

2. Since XYZ Pvt. Ltd. did not reverse the ITC by 30th November 20YY, the amount becomes payable
along with interest under Section 50 of CGST Act.
3. Yes, if the supplier subsequently files GSTR-3B (even after 30th November), XYZ Pvt. Ltd. can re-avail
the ITC in any GSTR-3B return filed there after.
4. Interest is payable from the date of availing ITC (October 20XX) till the date the amount is paid/ reversed.

Aakarsha Traders, a registered supplier under GST in Uttar Pradesh, had their GST registration
Q.4
cancelled retrospectively with effect from 1st September of current financial year. The cancellation order
was passed on 15th September of current financial year. At the time of cancellation, the supplier had not
availed ITC on certain eligible invoices issued in February and March of the preceding financial year for
inward supplies of taxable goods on which ITC is otherwise available under GST law.
Subsequently, on filing an application for revocation, the cancellation of registration was revoked by the
Proper Officer on 15th December of current financial year.
The firm wishes to file its GSTR-3B return for the month of September on 21st December of current financial
year and wishes to claim ITC on the said invoices of February and March of preceding financial year in this
return.
You are required to advise Aakarsha Traders whether it is entitled to claim input tax credit (ITC) in respect of
invoices issued in February and March of the preceding financial year in terms of provisions of the GST law
assuming that annual return for previous year is furnished on 31st December of the current financial year.
[CA Final RTP Sep 25]

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