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Sec 16(2) proviso — if the recipient fails to pay the supplier within 180 days from invoice date:
ANo effect on ITC
BSupplier must refund the GST
CITC is permanently forfeited
DITC equal to the unpaid portion of value + tax must be ADDED to output tax liability (effectively reversed) with interest under Sec 50
Answer & Solution
Correct answer: D. ITC equal to the unpaid portion of value + tax must be ADDED to output tax liability (effectively reversed) with interest under Sec 50
1. The 2nd proviso to Sec 16(2) — recipient must pay the supplier the value + tax within 180 days of invoice date.
2. If not, an amount equal to ITC availed on the unpaid portion is added to recipient's output tax liability with interest u/s 50.
3. Once the recipient subsequently pays the supplier, ITC can be re-availed (no time bar).
_Source: ICAI BoS CA Final Paper 8, Ch 6 "Input Tax Credit", §Sec 16(2) proviso (2nd)_
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