Constructive Payments to Vendors: Understanding GST Implications and Reversal of Input Tax Credit

• ABC Pvt Ltd has a works contract with M/s XYZ Ltd where XYZ makes payments to vendors on behalf of ABC
• Vendors issue bills to ABC but payments are made by XYZ
• Query about whether this indirect payment is considered constructive payment and if a 180-day reversal will not attract
• Possibility of GST department disputing indirect payment and asking for ITC reversal
• Section 15 of Value of taxable supply and Rule 37 about reversal of input tax credit
• Answer is no possibility of GST department disputing indirect payment and asking for ITC reversal

Source: taxmanagementindia.com

Note that this post was (partially) written with the help of AI. It is always useful to review the original source material, and where needed to obtain (local) advice from a specialist.

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