Reversal of input tax credit if payment not made to supplier within 180 days :
If payment of bill and tax thereon is not made within 180 days, input tax credit is required to be reversed – second proviso to section 16(3)(d) of CGST Act.
The purpose seems to be to avoid bogus invoices. However, since tax has been received by Government, there is no loss to Government revenue.
It is not clear why Government is acting as recovery agent for supplier.
In construction industry, retention of 5%/ 10% amount for one or two years is common. Some deductions from invoices are common in business. In such cases, reversal of ITC will be required.