CAF-2 · Chapter 18 · Question 2 of 15
Alpha Ltd purchased taxable raw materials worth Rs. 500,000 from a registered supplier on credit. The tax invoice was issued on 1 January 2026. Due to a liquidity crisis, Alpha Ltd paid the amount via a crossed cheque drawn on its business bank account on 15 August 2026 (after 227 days). What is the sales tax implication of this transaction for Alpha Ltd?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: B) B) The input tax will be disallowed because the payment was made after 180 days from the issuance of the tax invoice.
Explanation
Payment must be made within 180 days of the issuance of the tax invoice in case of credit transactions. If this condition is not fulfilled, the buyer will not be entitled to claim input tax, and if already claimed, it must be reversed in the month after the lapse of 180 days.
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