Credit Note Matching Dispute Highlights Complex GST Input Tax Credit Verification Challenges Under Section 43

The HC examined a GST-related challenge concerning credit note matching under Section 43 of the CGST Act. The court acknowledged the petitioner's concerns about proving ITC reversal by recipients but did not immediately grant relief. The HC directed the Union of India to propose a potential mechanism and scheduled a subsequent hearing to further assess the issue.

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Issues involved:
The absence of a proper mechanism for matching credit notes of the supplier with the ITC reversal by the recipient under Section 43 of the CGST Act/RGST Act.

The petitioner raised concerns regarding the lack of a mechanism for matching credit notes of the supplier with the ITC reversal by the recipient, previously mandated under Section 43 of the CGST Act/RGST Act. The petitioner argued that requiring a certificate from the recipient as proof of credit reversal for tax liability reduction is impractical. The petitioner contended that the responsibility of the matching exercise should lie with the department, not dependent on the production of certificates from the recipient.

The court noted that the challenge to the provision was primarily based on workability. As there is no statutory obligation for the respondent to conduct the matching exercise, the burden of providing proof of reversal by the recipient falls on the supplier if seeking a tax liability reduction. The petitioner's challenge focused on the difficulty in obtaining such certificates/proof from the recipient, despite managing to collect them in some instances. The court scheduled further consideration of the matter for the next hearing date without granting an interim order.

The court directed the counsel for the Union of India to present a suggested mechanism for consideration and listed the case for the next hearing on 05.10.2023.

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