Many businesses import goods on long credit terms. It is common in international trade to pay foreign suppliers after 90, 120 or even 180 days. Sometimes the payment gets delayed even more due to commercial reasons or because FEMA allows a longer credit period.
This often raises a genuine doubt during GST audit:
If payment to the foreign supplier is delayed beyond 180 days, do we need to reverse the Input Tax Credit of IGST paid at customs?
The clear and correct answer is: No. You do not need to reverse ITC on imports.
Below is an easy-to-understand explanation of why this is the law, what you should learn from it, and how to handle audits confidently.
Why the 180-day rule does not apply to imports
The GST law has a rule that if you do not pay your vendor within 180 days, you need to reverse the ITC and re-avail it after payment.
This rule is meant only for domestic purchases where:
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the supplier is a registered GST taxpayer,
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the supplier has issued a GST invoice, and
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GST is charged on that invoice.
But in imports, none of this happens.
A foreign supplier:
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is not a registered GST person in India,
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does not issue a GST invoice,
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does not charge GST.
Instead, you pay IGST directly at the customs port.
This is the tax that gives you ITC.
So the 180-day rule cannot apply.
Bill of Entry is your tax invoice for imports
For domestic purchases, the GST invoice is the document on which ITC is taken.
For imports, the equivalent document is the Bill of Entry.
If the Bill of Entry shows that IGST has been paid, ITC becomes fully eligible.
Whether you pay the foreign supplier after 30 days, 180 days, or 300 days does not affect your ITC.
FEMA rules and GST rules are separate
FEMA decides how long you can take to pay your foreign supplier.
GST decides when you can take ITC on imports.
These two laws do not overlap.
So even if FEMA allows you 9 months or more to pay the supplier, your GST credit is safe, because you already paid IGST at customs.
What the Gujarat AAR (Priya Holdings case) said
The Authority for Advance Rulings in Gujarat examined this exact issue and made things very clear:
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The 180-day rule applies only when the supplier is registered under GST.
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IGST on imports is already paid to the Government.
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Bill of Entry, not the foreign supplier invoice, is the document for ITC.
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Delayed payment under FEMA-permitted terms does not affect ITC.
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Asking for ITC reversal in such cases has no logic and defeats GST principles.
This reasoning is supported by the language and intention of the GST law.
What businesses should learn from this
This issue teaches three simple but important lessons.
A. ITC on imports is linked to IGST paid at customs, not to payment to suppliers
Once IGST is paid, ITC becomes available.
B. Delayed payment to foreign suppliers does not impact GST
If your payment terms stretch beyond 180 days, there is nothing to worry about from an ITC perspective.
C. Internal documentation is important
Keep your Bills of Entry, IGST payment proofs, shipping bills and bank payment documents organised.
These are enough to handle any audit query confidently.
How to handle this issue in audits or notices
If a GST officer asks why payment to the foreign supplier has not been made within 180 days, respond calmly with the following points:
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The foreign supplier is not registered under GST.
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The 180-day rule applies only to domestic GST invoices.
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IGST on imports has already been paid to the Government.
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The Bill of Entry is the governing document, not the commercial invoice.
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FEMA timelines for payment do not affect GST credit.
Attach copies of the Bills of Entry and IGST challans.
In most cases, the matter ends there.
Planning advantage for businesses
Because the 180-day rule does not apply to imports, businesses working with tight cash cycles can:
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negotiate longer payment timelines,
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use supplier credit effectively,
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plan working capital better,
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avoid unnecessary cash blockages.
Your ITC remains intact and available from day one.
Conclusion
The GST law is very clear and logical on this subject.
If you have paid IGST at customs, your ITC is secure.
There is no requirement to reverse ITC on imports just because payment to the foreign supplier is delayed beyond 180 days.
