Matching of credit note with input tax credit of recipient :
The details of every credit note relating to outward supply furnished by registered person (hereafter in this section referred to as ‘supplier’) for a tax period shall, be matched with following – (a) with the corresponding reduction in the claim for input tax credit by the corresponding registered person (hereafter referred to as ; 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 – section 43(1) of CGST Act.
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 to the supplier – section 43(2) of CGST Act.
Discrepancy will be informed to recipient and supplier – If 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 prescribed manner- section 43(3) of CGST Act.
The duplication of claims for reduction in output tax liability shall be communicated to the supplier – section 43(4) of CGST Act.
If the discrepancy communicated under section 43(3) of CGST Act is not rectified by the recipient in his valid return for the month in which discrepancy is communicated, it shall be added to the output tax liability of the supplier in his return for the month succeeding the month in which the discrepancy is communicated. – section 43(5) of CGST Act.
If recipient declares the details of the credit note in his valid return, the supplier can reduce his output tax liability – section 43(6) of CGST Act.
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 – section 43(6) of CGST Act.
Intimation of 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 17 of CGST Rules.
Reduction in tax liability of supplier if recipient accepts credit note – The supplier shall be eligible to reduce, from his output tax liability, the amount added under section 43(5), if the recipient declares the details of the credit note in his valid return within the time specified in section 39(9) of CGST Act – section 43(7) of CGST Act.
Interest if tax liability added to supplier – It is possible that credit note is not accepted by recipient or there is duplicate claim. In that case, the liability of supplier to pay tax will be enhanced and then interest will be payable. In later, the credit note is accepted by supplier, interest will be refunded to the supplier.
A supplier in whose output tax liability any amount has been added under section 43(5) or section 43(6) shall be liable to pay interest at the specified rate from the date of such claim for reduction in the output tax liability till the corresponding additions are made – section 43(8) of CGST Act.
If any reduction in output tax liability is accepted, under section 43(7), the interest paid under section 43(8) shall be refunded to the supplier by crediting the amount in the corresponding head of his electronic cash ledger. The amount of interest to be credited in any case shall not exceed the amount of interest paid by the recipient – section 43(9) of CGST Act.
Procedure for refund of interest paid on reclaim of reversals – The interest to be refunded under section 42(9) or section 43(9) of 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 of CGST Act – rule 18 of Return Rules.
Interest on amount reduced from output tax liability in contravention of provision – The amount reduced from output tax liability in contravention of the provision of section 43(7) shall be added to the output tax liability of the supplier in his return for the month in which such contravention takes place. Such supplier shall be liable to pay interest on the amount so added at rate specified in section 50(3) of CGST Act – section 43(10) of CGST Act.