GST on Trade Receivables and Payables at the Year End

GST on Trade Receivables explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.

Two ageing schedules, two clocks. On the receivables side an unrealised export can undo zero-rating; on the payables side an unpaid invoice can undo the credit. Both are read off the same working paper the auditor already has.

On exports: "rule 96A stipulates that convertible foreign currency or Indian rupees are to be received before the expiry of one year… In the event of non-realization of the proceeds from export of services within the stipulated time… GST is payable on the same." On payables: "ITC claimed must be reversed in case payment to the creditor is not made within a period of 180 days from the date of invoice and necessary interest to be provided on such reversal."

Receivables: the conditions that make an export an export

"In case of export of services, the GST mandates various conditions like location of supplier in India, location of recipient of services outside India, place of supply outside India, the receipt of sale proceeds should be in convertible foreign exchange or Indian rupees wherever permitted by RBI, and the supplier and recipient are not merely establishments of a distinct person."

Five conditions, and the fourth is the only one that can fail after the invoice is raised. The others are settled at the time of supply; realisation is settled up to a year later — which is why it belongs to the finalisation exercise rather than the monthly return.

Rule 96A and rule 96B: two different failures

Rule 96A — exports under LUT, without payment of tax. Proceeds must be received "before the expiry of one year, or such further period as may be allowed by the Commissioner, from the date of issue of the invoice for export." On failure, "GST is payable on the same."

Rule 96B — where a refund has been taken. "In case of export of goods, with payment of IGST or without payment of IGST, in terms of Rule 96B of the CGST Rules, 2017, if the export proceeds are not realized within the period allowed under the Foreign Exchange Management Act, 1999, any refund taken shall be paid back to the government with interest as an erroneous refund."

And the recovery route: "Once the forex payment is subsequently realized, then the exporter can re-claim the refunded amount."

The distinction is worth holding on to. Rule 96A creates a tax liability on the supply; rule 96B creates a repayment of a refund characterised as erroneous — a different amount, a different interest computation, and a different line in the accounts.

Sub-contracting abroad

"In export of services, there can be sub-contracting of some services outside India. In cases where such sub-contracting is involved to any other person outside India, then the impact of sub-contracting will lead to import of services in India and accordingly liability is to be discharged under the Reverse Charge Mechanism (RCM) by the Indian entity."

A zero-rated outward supply financed by a reverse-charge inward one — the export earns no output tax, but the sub-contract cost carries GST payable in cash. Entities that look only at the revenue side of an export contract routinely miss it. Import of services →

The Handbook's conclusion: "the auditor is expected to verify whether the export of services or goods meet the criteria in terms of receivables in foreign currency and whether the same is received within the stipulated period. In case the same is not done and if the tax payable is material, it may affect the 'True & Fair View'."

Payables: the 180-day rule

"For domestic creditors, review of payment is sine qua non as ITC claimed must be reversed in case payment to the creditor is not made within a period of 180 days from the date of invoice and necessary interest to be provided on such reversal. Auditor must also ensure that ITC so reversed is reclaimed when the payment is made to the creditor."

And the contractual credit period is irrelevant. Asked directly whether a longer agreed credit period helps, the Handbook answers: "An entity should reverse the input tax credit taken if the vendor is not paid within 180 days of invoice even if the credit period agreed between the parties are more than 180 days."

"Hence, it is clear that even in cases where the agreed credit period is more than 180 days, the input credit availed should be reversed as per section 16 of GST Act."

Note the statutory wording the Handbook quotes — the recipient must pay "the amount towards the value of supply along with tax payable thereon" within 180 days. Part-payment of the value without the tax does not stop the clock.

And reverse charge supplies are outside the rule — "other than the supplies on which tax is payable on reverse charge basis" — because there is no vendor holding the tax.

Foreign creditors and e-commerce

Two further payables checks:

• "In case of foreign creditors, particularly service vendors, the auditor should verify the impact of import of services and where applicable should review whether RCM has been properly discharged."
• "In case of e-commerce companies, provisions relating to TCS have to be closely monitored and discharging of liability should be done on a periodic basis."

The foreign creditors ledger is the natural place to test import-of-services completeness, because every import of service leaves a payable behind — which is more reliable than scanning expense heads one by one.

Key takeaways

• Export of services requires five conditions, of which only realisation can fail after the invoice.
• Rule 96A: under an LUT, proceeds within one year of the export invoice, extendable by the Commissioner — else GST becomes payable.
• Rule 96B: where proceeds are not realised within the FEMA period, any refund taken is repaid with interest as an erroneous refund.
• Refund repaid under rule 96B can be re-claimed on subsequent realisation.
• Sub-contracting abroad on an export contract is an import of services, taxable under RCM.
• Credit must be reversed with interest if a vendor is unpaid for 180 days from the invoice date.
• The agreed credit period does not extend the 180 days.
• Reversed credit is reclaimable on payment; reverse charge supplies are outside the rule.
• The foreign creditors ledger is the best completeness test for import of services; e-commerce entities must monitor TCS periodically.

Read next

• Expense-Side GST Review: RCM, Blocked Credit and ISD
• Reconciling GST Ledgers with the Books at Finalisation
• Reconciling Book Turnover with GST Returns

Disclaimer: Positions stated as on 5 September 2026, based on section 16 of the CGST Act, 2017, section 2(6) and section 16 of the IGST Act, 2017, rules 96A and 96B of the CGST Rules, 2017 and the Foreign Exchange Management Act, 1999, as reproduced in the ICAI Handbook on Finalisation of Accounts with GST Perspective (Second Edition, June 2026).