Avalara > Blog > Goods and Services Tax > Service companies will be required to pay GST on defaults and bad debts

Service companies will be required to pay GST on defaults and bad

  • Jun 8, 2020 | Divita S Gupta

An increasing number of defaulting customers are on the rise due to the COVID-19 crisis, and service companies are bearing the brunt of these defaults as they are required to pay GST on the defaults as well as the bad debts.

As there is no provision to allow adjustments of GST paid on supplies for which recoveries are not made, service companies have to pay GST when they raise the invoice or generate the bill even if the customer pays the money much later.

This situation is having companies struggle over maintaining cash flow as they need to make payments from their own pockets. It is also leading to losses on account of consideration for supply not being received, coupled with an outflow of GST. While this has been a historical concern for businesses, the current COVID-19 crisis has service companies reaching out to the Government requesting relief. 


Avalara helps businesses of all sizes get GST return filing, e-way bill generation and e-invoicing right with cloud-based GST compliance solutions in India. Goods and Services Tax (GST) rates, rules, and regulations change frequently. Although we hope you'll find this information helpful, this blog is for informational purposes only and does not provide legal or tax advice.
Avalara Author
Divita S Gupta
Avalara Author Divita S Gupta
Divita has served as a writer and editor for top financial services organizations in India. She has written on topics like mutual funds, insurance, taxes, SME financing for globally recognized banking and financial organizations including ICICI, Aditya Birla Group, News Corp. With a Masters in Business Administration from Symbiosis International University, she currently owns a small business in Mumbai.