In a recent ruling dated September 6, 2025, the Gujarat Authority for Advance Rulings (AAR) addressed a query from M/s Priya Holdings Pvt. Ltd. regarding the eligibility of Input Tax Credit (ITC) on Integrated Goods and Services Tax (IGST) paid for imported goods. The company, involved in trading ferrous and non-ferrous metal scrap, sometimes delays payments to foreign suppliers beyond 180 days due to commercial agreements, in line with FEMA and RBI guidelines. They sought clarification on whether such delays necessitate the reversal of ITC as per the provisions of the CGST Rules, 2017.
The AAR examined whether the ITC of IGST paid at import needs to be reversed if the payment to the foreign supplier is delayed. It concluded that since the IGST is paid directly to the government at the customs port, rather than to the supplier, the condition under the proviso to Section 16(2) of the CGST Act does not apply. The ruling emphasized that the bill of entry, used during customs, is the valid document for ITC entitlement, not the supplier's invoice.
Read More: J&K High Court – Cross empowerment under Section 6 is automatic, Officers appointed under State GST Acts are deemed proper officers under CGST Act; Section 74 does not prohibit a single composite SCN covering multiple financial years [Order attached]
Thus, the AAR ruled that the ITC on IGST paid for imports remains valid even if the payment to the foreign supplier is delayed beyond 180 days, as long as the transaction adheres to FEMA and RBI regulations. This decision underscores that the remittance of tax to the government ensures ITC eligibility, irrespective of payment timelines to overseas vendors.
Order date: 06 Sept 2025
Parties: M/s Priya Holdings Pvt. Ltd., Bhavnagar
Facts –
- The applicant, a trader in ferrous and non-ferrous metal scrap, imports goods from overseas suppliers and pays IGST at the time of import, claiming it as Input Tax Credit (ITC).
- Due to commercial arrangements, payments to foreign suppliers are sometimes made after 180 days in accordance with FEMA/RBI guidelines.
- The applicant sought clarification on whether such delayed payment would require reversal of ITC under second proviso to Section 16(2) read with Rule 37 of the CGST Rules, 2017.
Issue –
- Whether ITC of IGST paid at the time of import needs to be reversed if payment to the foreign supplier is made after 180 days from the date of invoice?
Order –
- The Authority noted that in case of imports, IGST is paid directly to the Government at the customs port, not to the supplier. Thus, the condition under Section 16(2) proviso (which applies to payments made to suppliers) does not apply.
- The bill of entry, not the supplier’s invoice, forms the valid document for ITC entitlement under Section 16(2)(a).
- Since the tax is already remitted to the Government, delayed payment to the overseas vendor does not affect ITC eligibility.
- The AAR therefore ruled that ITC of IGST paid on import of goods remains admissible, even if payment to the foreign supplier is made beyond 180 days, provided the transaction complies with FEMA and RBI norms.
