In the realm of debt recovery, securing evidence that strengthens your case is paramount. The Central Goods and Service Tax (CGST) Rules, specifically Rule 138 (11) & (12), offer a valuable tool for creditors in this regard. Let’s delve into how these rules can be leveraged to your advantage.

Understanding Rule 138 (11) & (12):

• Rule 138 (11): This rule allows a registered supplier (creditor) to claim a credit for tax paid on a supply (sale of goods or services) even if the payment hasn’t been received from the recipient (debtor). However, a crucial condition applies: the creditor must have included the supply in their return filed electronically.
• Rule 138 (12): This rule deals with the reversal of the aforementioned credit if the payment for the supply is not received within a specific timeframe (one year from the due date of payment). This reversal essentially prevents the creditor from claiming a tax benefit they haven’t realized due to non-payment.

How These Rules Help Creditors:

The key takeaway from these rules lies in the concept of claiming a tax credit despite non-payment. By electronically filing a return that includes the unpaid supply, the creditor essentially puts on record the amount due from the debtor. This documented record can be presented as evidence in court, potentially strengthening the creditor’s case in a debt recovery lawsuit.

It’s Not a Guarantee, But a Strong Indication:

While including the supply in a return doesn’t guarantee a court victory, it serves as a strong admission of debt on the part of the debtor. The debtor’s act of not contesting the included supply within a specified time frame (typically 30 days) can be interpreted as an acknowledgement of the debt’s validity.

Important Considerations:

• Timely Filing: The creditor must ensure they electronically file their return that includes the unpaid supply within the prescribed timeframe.
• Not a Substitute for Legal Action: These rules don’t eliminate the need for potentially pursuing legal action to recover the debt. However, they do provide valuable evidence to support your claim.

Conclusion

By understanding Rule 138 (11) & (12) of the CGST Rules, creditors gain a valuable tool for debt recovery. While not a magic bullet, documented evidence of including the unpaid supply in a return can significantly strengthen your case and increase the chances of a successful outcome. Remember, consulting a tax professional for tailored advice is always a wise step.