Regarding non payment by recepient, Goods and Services Tax - GST

[YASH JAIN]

I had sold goods to other party and paid GST on portal but the buyer has not paid the amount to seller within 180 days and seller is thinking that amount will not come.

So is there any chance to get my GST back?

Posts / Replies

[Ramanathan Seshan]

Dear Yash-sir,

Kindly note that it is not possible to do anything to the tax paid to the government. However, you can communicate to the tax payer using the tab available on the GST portal. Kindly note that this is just a feature available and non enforceable in nature.

Regards,

S Ram

[YAGAY andSUN]

That's an important and nuanced situation—many sellers face this dilemma when buyers default on payments after GST has already been deposited with the government.

Let’s break it down clearly and in simple terms based on current GST rules in India (as of FY 2024-25):

🔍 The Issue: Buyer Didn't Pay Within 180 Days

You, the supplier, sold goods/services and paid GST to the government based on your invoice. But the buyer has not paid you within 180 days, and you now believe they may never pay.

Under Section 16(2) of the CGST Act, there’s a rule that affects Input Tax Credit (ITC)—primarily for the buyer, but not directly for the seller.

✅ What Happens in Such a Case?

1. GST Paid by Seller is Final:

   • Once you pay GST on an outward supply (sale), you can’t claim a refund of it just because the buyer didn’t pay you.

   • GST is a transaction-based tax, not a receipt-based one.

2. Implication for Buyer (Not Seller):

   • The buyer is required to reverse the ITC they claimed if they don’t pay the invoice value + GST to you within 180 days.

   • But this is the buyer’s responsibility, not yours.

3. Seller Has No Automatic Refund Option:

   • There is no provision in the GST law allowing the seller to reverse or reclaim GST already paid to the government due to buyer's default.

   • Your GST liability remains even if you never receive the payment.

⚠️ But Is There Any Relief or Option?

✉️ Communicate via GST Portal (Non-Enforceable)

• The “Communication Between Taxpayers” tab on the GST portal allows you to inform or remind the buyer about the unpaid amount.

• However, this feature is informal and non-binding. It does not compel the buyer to act.

💼 Consider Legal/Recovery Action

• From a commercial standpoint, you may explore:

  • Sending a legal notice

  • Initiating recovery proceedings

  • Filing a civil suit, if the amount is significant

🧾 Write-Off for Income Tax (Not GST)

• If you conclude the payment will never come, you may consider writing it off as a bad debt under Income Tax (subject to certain conditions)—but GST won’t be refunded.

🧾 What You Can Do

Action	Applicability	Remarks
Reclaim GST	❌	Not allowed under GST law
Inform buyer via GST portal	✅	Non-binding, but worth trying
Reverse the sale invoice	❌	Not allowed unless supply is canceled or returned
Legal action against buyer	✅	Depends on feasibility
Write-off in accounts	✅	For income tax treatment, not for GST refund

🔚 Conclusion

You cannot claim a refund of GST already paid to the government even if the buyer defaults on payment. Unfortunately, GST law does not link tax liability with actual receipt of money. You're advised to consider legal or commercial recovery options, and possibly account for the bad debt under your books.

Below is a professional notice format you can send to the defaulting buyer regarding non-payment of dues after 180 days, despite the supply of goods and GST payment. This can be sent via email or registered post, and optionally uploaded under the “Communication Between Taxpayers” tab on the GST portal.

[Your Company Letterhead or Name]

[Your Address]
GSTIN: [Your GST Number]
Email: [Your Email] | Phone: [Your Contact Number]

Date: [DD/MM/YYYY]

To,
[Buyer’s Name / Company Name]
[Buyer’s Address]
GSTIN: [Buyer’s GST Number]

Subject: Final Notice for Outstanding Payment of Invoice No. [Invoice Number]

Dear [Mr./Ms./M/s. Buyer Name],

We write to formally bring to your attention that payment for goods supplied under the following invoice(s) remains unpaid despite several reminders:

• Invoice Number: [Invoice Number]

• Invoice Date: [Date]

• Invoice Value (including GST): ₹[Amount]

• Due Date: [Original Due Date]

• GST Paid: ₹[GST Amount], paid to the Government under GST Return for [Month & Year]

As per the provisions of the GST Act, although you have not remitted the payment within the statutory limit of 180 days, we, the supplier, have fulfilled our obligations in full by supplying the goods/services and paying the applicable GST to the government.

Please note that non-payment not only violates our commercial agreement but also potentially exposes you to reversal of Input Tax Credit (ITC) under Section 16(2) of the CGST Act, 2017, which mandates that payment for supplies must be made within 180 days of the invoice date.

We urge you to clear the outstanding amount of ₹[Amount] immediately, failing which we will be constrained to initiate:

1. Legal proceedings to recover the said amount with applicable interest and costs; and

2. Report the default in appropriate forums including under the GST portal’s communication facility.

This is a final reminder. If the full amount is not received within [7/15] days from the date of this notice, we will proceed without any further intimation.

We hope to receive your cooperation and expect the matter to be resolved amicably at the earliest.

Thanking you.

Yours faithfully,
[Your Full Name]
[Designation]
[Your Business Name / Company]
Signature