GST UPDATE ON ADMISSIBILITY OF CREDIT ON RETENTION MONEY
By: – Pradeep Jain
Goods and Services Tax – GST
Dated:- 12-12-2017
In normal parlance, there are cases where the service recipient retains a certain portion of payments to be made to the service provider. The amount so retained is paid to the service provider only after the provision of service is complete. This update seeks to take an insight into various provisions for ascertaining whether the credit will be allowed of the GST portion pertaining to the said retention money. Before Point of Taxation Rules, 2011 were introduced, service tax was payable on receipt basis. Therefore, cenvat credit of the service tax paid was allowed upon partial payment along with service tax, on the basis of invoice raised. After Point of Taxation Rules, 2011, point of taxation was shifted to date of invoice or date of receipt of payment, whichever is earlier. Thus, CENVAT credit was allowed on accrual basis. Rule 4(7) of the CENVAT
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16 of CGST Act, 2017. Second proviso to section 16(2) reads as follows:-
"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:"
The language of this proviso uses the words "amount towards value of supply alongwith tax payable". This indicates that the amount can be any portion of value of supply (as it does notsays that the entire bill should not be paid) and tax payable thereon. As such, it can be inferred that the ITC alongwith interest shall be required to be reversed only to the portion of bill not paid to
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Reply By JAIPRAKASH RUIA as =
The language clearly mention the word " fails to pay". In case of retention money, the receiver of goods or service or both doesn't fails to pay but didn't pay as per and in line with contract or agreement. If the retention money is payable after three year as per contract, one can not say that receiver filed to pay but the same is payable only at the end of third year. Other is value alongwith tax payable. When it is not yet payable to supplier, it can not become payable. Third the credit to receiver is available to receiver on payment of tax to govt. by supplier, hence govt. tax cycle end there. Govt. can only ensure the interest of revenue but can not decide the business terms of tax payers.
Full credit should be available even if the retention money is not paid within 6 month if contract permit.
Even D/N issued should also be considered as payment because in that case the am
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