Service companies will be required to pay GST on defaults and bad

An increasing number of defaulting customers are on the rise due to the COVID-19 crisis, and service companies are bearing the brunt of these defaults as they are required to pay GST on the defaults as well as the bad debts.

As there is no provision to allow adjustments of GST paid on supplies for which recoveries are not made, service companies have to pay GST when they raise the invoice or generate the bill even if the customer pays the money much later.

This situation is having companies struggle over maintaining cash flow as they need to make payments from their own pockets. It is also leading to losses on account of consideration for supply not being received, coupled with an outflow of GST. While this has been a historical concern for businesses, the current COVID-19 crisis has service companies reaching out to the Government requesting relief.