• Payment Issue Taxation Billing

Assume We have done 100 Rs work for our client but he is not able to pay us the amt as he is in Financial Crisis. We haven't made invoice yet as upfront we would have had to pay 18 Rs GST on it first. And it would have shown in our receivables and we would have req to pay Income Tax on it before even they pay the due. So in this case what is the solution for this senario ?
Asked 1 month ago in Income Tax from Pune, Maharashtra

Dear Sir,

 

Here is my replies to your queries:

 

1) In case you have provided the goods or services to the client but haven't made any invoice and haven't received any payment yet, as per the provisions of GST Act, you are not supposed to make the payment as the invoice is not raised yet. As per the provisions of GST Act, GST to be paid on 20th of the next month in regard to all the invoices generated in the previous month. 

So, in your case no invoice means no GST. 

 

2) In case of income tax, you will record the transaction only when you will generate the invoice and if there is no invoice it will not be recorded n your books of accounts. In income tax act there is provision to book income and if not recoverable you can simultaneously book bad debts so there will be no tax on the income booked. But if you book the income means raise the invoice GST should  be paid. So i suggest just avoid the transaction if you are 100% sure that you will not receive the payments.

 

I hope your queries are resolved.

 

Let me know if you have any other query regarding the same!

 

Thanks and Regards 

Divya Chugh  

Divya Chugh
CA, Delhi
139 Answers
1 Consultation

5.0 on 5.0

Hi

 

If services have already been provided, Tax Invoice has to be issued within 30 days as per section 31(2) of the CGST Act. Even if payment is not received, GST shall have to be paid by you.

 

If there are many such transactions in your case, you may adopt cash basis of accounting and pay income tax accordingly.

Lakshita Bhandari
CA, Mumbai
4255 Answers
239 Consultations

5.0 on 5.0

Yes sir. You are right but in this case if you are sure that payments will not be received so booking it as income will cause you a loss of additional 18 rupees for GST apart from the normal loss of revenue of 100 rupees.

 

Thanks and Regards

Divya Chugh

Divya Chugh
CA, Delhi
139 Answers
1 Consultation

5.0 on 5.0

As I mentioned earlier, If there are many such transactions in your case, you may adopt cash basis of accounting and pay income tax accordingly.

 

Anyways no businessman will continue providing services to such people, where he anticipates that money will not be recovered.

Lakshita Bhandari
CA, Mumbai
4255 Answers
239 Consultations

5.0 on 5.0

If you haven't raised an invoice and there is no trace of your work then you cannot pay GST on same as you have provided service without any consideration.

But if you have recorded the thing in your book and shown that you have provided service then there is no provision in GST which says that GST wont be paid for bad debt.

Are your accounts getting audited?

 

Hope you find the information helpful if you do please rate it 5 and provide your valuable feedback for my improvement.

Thank you.

Naman Maloo
CA, Jaipur
2688 Answers
24 Consultations

5.0 on 5.0

Hi,

 

It is advisable to use cash method of accounting for income tax purpose.

Payal Chhajed
CA, Mumbai
3730 Answers
50 Consultations

5.0 on 5.0

Hello,

 

You will have to issue the invoice under GST for such a supply of services within 30 days from the supply of services. There is no procedure in law for delay or avoidance of issuing the invoice. GST would be leviable as per the time of supply.

Under Income Tax, you can claim bad debts against such income.

I hope that this answer satisfies your requirements.

 

Regards,

CA Hunny Badlani

Badlani & Associates

 

 

Hunny Badlani
CA, Madhya Pradesh
1587 Answers
5 Consultations

5.0 on 5.0

There is always some sort of risk involved in the business. Advance requirements can be raised on such customers.

Further, you can shift to the cash method of accounting.

Hunny Badlani
CA, Madhya Pradesh
1587 Answers
5 Consultations

5.0 on 5.0

It is advisable to take a phone consultation for detailed discussion.

Payal Chhajed
CA, Mumbai
3730 Answers
50 Consultations

5.0 on 5.0

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