Sec 43 – Matching, reversal and reclaim of reduction in output tax liability

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Sec 43 – Matching, reversal and reclaim of reduction in output tax liability 2017-04-14T14:52:38+00:00

GST India Forum – Goods and Services Tax (GST) in India Forums Bare Law Sec 43 – Matching, reversal and reclaim of reduction in output tax liability

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  • Ashish BadalaCA Ashish Badala
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    (1) The details of every credit note relating to outward supply furnished by a registered person (hereafter in this section referred to as the “supplier”) for a tax period shall, in such manner and within such time as may be prescribed, be matched–
    (a) with the corresponding reduction in the claim for input tax credit by the corresponding registered person (hereafter in this section referred to as the “recipient”) in his valid return for the same tax period or any subsequent tax period; and
    (b) for duplication of claims for reduction in output tax liability.
    (2) The claim for reduction in output tax liability by the supplier that matches with the corresponding reduction in the claim for input tax credit by the recipient shall be finally accepted and communicated, in such manner as may be prescribed, to the supplier.
    (3) Where the reduction of output tax liability in respect of outward supplies exceeds the corresponding reduction in the claim for input tax credit or the corresponding credit note is not declared by the recipient in his valid returns, the discrepancy shall be communicated to both such persons in such manner as may be prescribed.
    (4) The duplication of claims for reduction in output tax liability shall be communicated to the supplier in such manner as may be prescribed.
    (5) The amount in respect of which any discrepancy is communicated under sub-section (3) and which is not rectified by the recipient in his valid return for the month in which discrepancy is communicated shall be added to the output tax liability of the supplier, in such manner as may be prescribed, in his return for the month succeeding the month in which the discrepancy is communicated.
    (6) The amount in respect of any reduction in output tax liability that is found to be on account of duplication of claims shall be added to the output tax liability of the supplier in his return for the month in which such duplication is communicated.
    (7) The supplier shall be eligible to reduce, from his output tax liability, the amount added under sub-section (5) if the recipient declares the details of the credit note in his valid return within the time specified in sub-section (9) of section 39.
    (8) A supplier in whose output tax liability any amount has been added under sub-section (5) or sub-section (6), shall be liable to pay interest at the rate specified under sub-section (1) of section 50 in respect of the amount so added from the date of such claim for reduction in the output tax liability till the corresponding additions are made under the said sub-sections.
    (9) Where any reduction in output tax liability is accepted under sub-section (7), the interest paid under sub-section (8) shall be refunded to the supplier by crediting the amount in the corresponding head of his electronic cash ledger in such manner as may be prescribed:
    Provided that the amount of interest to be credited in any case shall not exceed the amount of interest paid by the recipient.
    (10) The amount reduced from output tax liability in contravention of the provisions of sub-section (7) shall be added to the output tax liability of the supplier in his return for the month in which such contravention takes place and such supplier shall be liable to pay interest on the amount so added at the rate specified in sub-section (3) of section 50.

    Priya MadrechaPriya Madrecha
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    43.1 Introduction
    This provision relates to matching, reversal and reclaim of output tax liability caused by the issuance of a credit note
    43.2 Analysis
    A.     Issuance of Credit note for reduction in output tax liability
    (a)    Where the output tax is reduced by outward supplier by issuing a credit note, details of every such credit note issued should be matched with the corresponding reduction in the credit by the recipient of the amount involved in the credit note in his valid return filed for the current or subsequent tax period. For example, a sale invoice at Rs 150,000 was overstated by Rs 50,000 for which a credit note was issued. This credit note should be accounted by the recipient in a valid return filed for the current or subsequent tax period
    (b)    Similarly where the supplier has raised say, two invoices and has paid out put tax twice, where a credit note has been raised, the same shall also be accounted by the recipient. However if the recipient has accounted for the invoice only once, he need not account for the credit note
    B.    Communication of corrections and impact of corrections
    Particulars     Communication
    When credit note and claim for reduction of output tax liability by the supplier matches with the corresponding reduction in input tax credit claim by the recipient or is lower than the ITC claim by the recipient for the said credit note
    Example A – both parties account for a credit note raised by the supplier, that results in lower of output tax liability and input tax credit by Rs 10000
    Example B – A issues a credit note for Rs 10000 reduction in output tax liability as compared to an reduction in input tax credit for Rs 11000 by the recipient will also be treated as a matched transaction      The same will be accepted and communicated to the supplier in FORM GST MIS
    -3

    When credit note and claim for reduction of output tax liability by the supplier exceeds, partly with the corresponding reduction in input tax credit by the recipient as declared in his returns
    Example where a credit note that results in the reduction of output tax liability for Rs 10000 has been accounted for Rs 4000 and stated as such in their return at Rs 4000
    The discrepancy will be communicated to both parties and shall be added to the output tax liability of the supplier for Rs 6000 , in the month in which the discrepancy is communicated in FORM GST MIS- 3 and FORM
    GST MIS- 4
    When credit note and claim for reduction of output tax liability by the supplier exceeds, wholly with the corresponding reduction in input tax credit by the recipient as declared in his returns
    Example where a credit note that results in the reduction of output tax liability for Rs 10000 has not been
    accounted at all or considered in his returns      The discrepancy will be communicated to both parties and shall be added to the output tax liability of the supplier for Rs 10,000 in the month in which the discrepancy is communicated in FORM GST MIS- 3 and FORM
    GST MIS- 4
    C.    Consequence of acceptance of correction by recipient
    If the recipient accepts the discrepancy and rectifies the same by filing a valid return subsequently, then the tax amount involved will be excluded from the output liability of the supplier for the month in which the discrepancy is communicated.
    In other words, as soon as discrepancy is communicated, the tax involved will be recovered from the supplier which will be readily reversed when the recipient admits and rectifies the discrepancy.
    Discrepancies relating to duplicate claims for reduction of output tax liability will be added to the output liability of the supplier for the month in which the discrepancy is communicated.
    D.    Charge of interest
    Supplier will be liable to payment of interest in every case when discrepancy by way of amount of output tax liability is added and interest will be paid on reversal of the liability added earlier after due rectification by the recipient.
    Supplier shall be eligible to reduce, from his output tax liability, the amount of discrepancy added, when the recipient declares the details of the credit note in his valid return within the time specified.
    Refund provisions under section 54 shall not to be applicable and this refund will be credited into the electronic cash ledger. Interest paid that is reversed to the supplier will not exceed interest recovered from the recipient. Reference may be had to the discussion under section 42 which discusses this aspect of payment of interest by the recipient.
    Any reduction of amount from output tax liability by the supplier in contravention of the provisions will be added to the output liability of the supplier in his return for the month in which such contravention takes place and recovered along with applicable interest.
    Rule14. Matching of claim of reduction in the output tax liability
    The following details relating to the claim of reduction in output tax liability shall be matched under section 43 after the due date for furnishing the return in FORM GSTR-3 –
    (a)    GSTIN of the supplier;
    (b)    GSTIN of the recipient;
    (c)    credit note number;
    (d)    credit note date; (e)      taxable value; and (f)      tax amount:
    Provided that where the time limit for furnishing FORM GSTR-1 under section 37 and FORM GSTR-2 under section 38 has been extended, the date of matching of claim of reduction in the output tax liability shall be extended accordingly.
    Explanation 1.- The claim of reduction in output tax liability due to issuance of credit notes in FORM GSTR-1 that were accepted by the recipient in FORM GSTR-2 without amendment shall be treated as matched if the corresponding recipient has furnished a valid return.
    Explanation 2.- The claim of reduction in the output tax liability shall be considered as matched, where the amount of reduction claimed is equal to or less than the claim of reduction in input tax credit admitted and discharged on such credit note by the corresponding recipient in his valid return.
    Rule 15. Final acceptance of reduction in output tax liability and communication thereof
    (1)    The final acceptance of claim of reduction in output tax liability in respect of any tax period, specified in sub-section (2) of section 43, shall be made available electronically to the person making such claim in FORM GST MIS–3 through the Common Portal.
    (2)    The claim of reduction in output tax liability in respect of any tax period which had been communicated as mis-matched but is found to be matched after rectification by the supplier or recipient shall be finally accepted and made available electronically to the person making such claim in FORM GST MIS–3 through the Common Portal.
    Rule 16. Communication and rectification of discrepancy in reduction in output tax liability and reversal of claim of reduction
    (1)    Any discrepancy in claim of reduction in output tax liability, specified in sub-section (3) of section 43, and the details of output tax liability to be added under sub-section (5) of the said section on account of continuation of such discrepancy shall be made available to the registered person making such claim electronically in FORM GST MIS–3 and the recipient electronically in FORM GST MIS–4 through the Common Portal on or before the last date of the month in which the matching has been carried out.
    (2)    A supplier to whom any discrepancy is made available under sub-rule (1) may make suitable rectifications in the statement of outward supplies to be furnished for the month in which the discrepancy is made available.
    (3)    A recipient to whom any discrepancy is made available under sub-rule (1) may make suitable rectifications in the statement of inward supplies to be furnished for the month in which the discrepancy is made available.
    (4)    Where the discrepancy is not rectified under sub-rule (2) or sub-rule (3), an amount to the extent of discrepancy shall be added to the output tax liability of the supplier and debited to tax liability register and also shown in his return in FORM GSTR-3 for the month succeeding the month in which the discrepancy is made available.
    Explanation 1.- Rectification by a supplier means deleting or correcting the details of an outward supply in his valid return so as to match the details of corresponding inward supply declared by the recipient.
    Explanation 2.- Rectification by the recipient means adding or correcting the details of an inward supply so as to match the details of corresponding outward supply declared by the supplier.
    Rule 17. Claim of reduction in output tax liability more than once
    Duplication of claims for reduction in output tax liability in the details of outward supplies shall be communicated to the registered person in FORM GST MIS – 3 electronically through the Common Portal.
    Rule 18. Refund of interest paid on reclaim of reversals
    The interest to be refunded under sub-section (9) of section 42 or sub-section (9) of section 43 shall be claimed by the registered person in his return in FORM GSTR-3 and shall be credited to his electronic cash ledger in FORM GST PMT-3 and the amount credited shall be available for payment of any future liability towards interest or the taxable person may claim refund of the amount under section 54.
    F.     Transactions through E-commerce Operators
    Rule 19 deals with the matching of details furnished by the e-Commerce operator with the details furnished by the supplier
    The following details relating to the supplies made through an e-Commerce operator, as declared in FORM GSTR-8, shall be matched with the corresponding details declared by the supplier in FORM GSTR-1- (a)  GSTIN of the supplier;
    (b)    GSTIN or UIN of the recipient, if the recipient is a registered person;
    (c)    State of place of supply;
    (d)    invoice number of the supplier;
    (e)    date of invoice of the supplier;
    (f)    taxable value; and (g)      tax amount:
    Provided that for all supplies where the supplier is not required to furnish the details separately for each supply, the following details relating to such supplies made through an eCommerce operator, as declared in FORM GSTR-8, shall be matched with the corresponding details declared by the supplier in FORM GSTR-1
    (a)    GSTIN of the supplier;
    (b)    State of place of supply;
    (c)    total taxable value of all supplies made in the State through e-commerce portal; and (d)      tax amount on all supplies made in the State:
    Provided further that where the time limit for furnishing FORM GSTR-1 under section 37 has been extended, the date of matching of the above mentioned details shall be extended accordingly.
    Rule 20 deals with Communication and rectification of discrepancy in details furnished by the e-commerce operator and the supplier
    (1)    Any discrepancy in the details furnished by the operator and those declared by the supplier shall be made available to the supplier electronically in FORM GST MIS-5 and to the e-commerce portal electronically in FORM GST MIS–6 through the Common Portal on or before the last date of the month in which the matching has been carried out.
    (2)    A supplier to whom any discrepancy is made available under sub-rule (1) may make suitable rectifications in the statement of outward supplies to be furnished for the month in which the discrepancy is made available.
    (3)    An operator to whom any discrepancy is made available under sub-rule (1) may make suitable rectifications in the statement to be furnished for the month in which the discrepancy is made available.
    (4)    Where the discrepancy is not rectified under sub-rule (2) or sub-rule (3), an amount to the extent of discrepancy shall be added to the output tax liability of the supplier in his return in FORM GSTR-3 for the month succeeding the month in which the details of discrepancy are made available and such addition to the output tax liability and interest payable thereon shall be made available to the supplier electronically on the Common Portal in FORM GST MIS–5.

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