GST if payment for service not received

1. GST on Unpaid Invoices for Services Rendered Internationally:

   • According to the IGST Act, for a supply of services to qualify as an export, certain conditions must be met, including the receipt of payment in convertible foreign exchange or in Indian rupees wherever permitted by the Reserve Bank of India. If these conditions are not met, the transaction not qualify as an export of services.
   • In your case, if the payment from your client in Saudi Arabia has not been received, it impact the status of the transaction as an export. It does not qualify as an export, you have to pay GST on the invoice amount despite not receiving the payment. This is a complex area and depends on various factors like the time elapsed since the invoice was issued and the specifics of the transaction.

2. Reversing GST Credits for Unpaid Commission:

   • If you have claimed GST input tax credit on the commission invoice from the agent in Bangalore but haven't made the payment, the GST rules require you to reverse the input tax credit if the payment isn’t made within 180 days from the date of the invoice. This means you would need to reverse itc in next month.
   • Once you make the payment to the agent, you can reclaim the input tax credit.

Please let me know if you need any other clarification!

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Shubham Goyal

In which month you raised the invoice to the overseas client?

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GST if payment for service is not received

If payment of export of services is not received by the exporter in convertible foreign exchange or in Indian Rupees  (wherever permitted by RBI) within 1 year from date of issue of export invoice, then exporter is liable to pay IGST within 15 days after the expiry of time limit of 1 year or any such further period as may be allowed by commissioner.

Therefore, you need to pay IGST on this invoice as payment will not be received as mentioned by you.

You can pay IGST for the month when you have issued the invoice and issue a credit note in next month and adjust it against the output tax to be paid for domestic supplies, if any.

Input tax credit taken on unpaid invoice

In this case you need to reverse the Input tax credit, if payment is not made to agency within 180 days from date of invoice as per rule 37 of GST act.

Please let me know in case you need any other clarification

Hope this information was useful to you. If you could spare two minutes of your time to write a review, I would be highly grateful to you and would love to read your feedback.

Did you not show such service in export under LUT?

Why are you paying GST on export service?

You need to raise credit note if you are not goin to receive any amount from your client otherwise you are liable to pay GST.

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Thank you.

You can reverse the Input Tax Credit in your next GSTR 3B.