How to return the claimed ITC on Purchase return?

[Shravan Kumar]

An invoice raised in the month of June 2018 has been canceled by raising Credit note in July 2018 by a vendor. We have claimed ITC in the June 2018 for the received invoice.

As the vendor cancelled the Invoice by raising Credit note, how we can return the ITC claimed in June for the said invoice?

[SHIVKUMAR SHARMA]

While filing your Next month GSTR3B Return, you can reduce your Inputs Tax Credit in Table 4 Eligible ITC.

[Shravan Kumar]

How does Claiming Less ITC in the next month GSTR 3B, will resolve the issue?

If I claim less ITC, the GST will treat it as the full availed credit, but no justification is made for the same!

Correct me if I am wrong!!!

[SHIVKUMAR SHARMA]

Please see the Example :

At your End:

You have taken ITC agst.Supplier Invoice No.01 ₹ 1000 in GSTR3B of June 18

You have Reduced The ITC agst.Supplier Invoice No01 ₹ 1000 in GSTR3B of July18

Finaly Net effect of Credit agst Supplier Invoice No1 is ₹ 0

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At Supplier end :

Supplier Issue Invoice No 01 in June 18 & paid GST ₹ 1000 in GSTR3B of June 18 & Upload The Invoice in GSTR1 return of June18.

Next Month Supplier have issued Credit note agst Invoice No.1 & Reduced his Liability of GST by ₹ 1000 in GSTR3B of Month in which Credit note is Issued & the same Credit note is uploaded on GSTR1 Return. The Net effect of GST is Zero at the Both end.

[Ganeshan Kalyani]

The legal backing for reversing the input tax credit on account of purchase return, invoice cancelled etc is given under section 34 of CGST Act, 2017.

[DR.MARIAPPAN GOVINDARAJAN]

I endorse the views of Sivakumar Sharma

[Avneesh Sachdev]

we can issue a tax invoice to return goods

AI Summary

Input Tax Credit reversal: reduce eligible ITC in subsequent GSTR 3B when supplier issues a credit note.
When a supplier cancels a purchase invoice by issuing a credit note after the recipient has claimed Input Tax Credit, the recipient should reverse that ITC by reducing eligible ITC in the subsequent GSTR 3B Table 4. The supplier records the credit note, reduces its output tax liability and uploads it in GSTR 1. The statutory basis for such adjustment is section 34 of the CGST Act; parties may also issue a tax invoice to effect the goods return.