reverse charge import of services

[Madhavan iyengar]

A Company based X in India has imported services from its related party B in Germany, X has discharged IGST on RCM basis based on invoice of ₹ 100000/- ( converted value) issued by B and claimed ITC of say ₹ 18000

Issue: After 4 months B issues a credit note to A reducing the earlier invoice amount.by rs. 50000/-

Is A required to reverse the ITC of IGST taken earlier in proportion to reduction in value of the invoice - ie is IGST reversal of rs. 9000 to be done by A

If no then reasons for same

AI Summary

Debate Over ITC Reversal for Financial Credit Notes in Cross-Border Services Import Under Reverse Charge Mechanism A company in India imported services from a related German company, paying IGST on a reverse charge mechanism and claiming input tax credit (ITC). Later, the German company issued a financial credit note reducing the invoice amount. The discussion revolves around whether the Indian company must reverse the ITC proportionally. One expert argues that reversal is unnecessary for financial credit notes as they do not affect GST liability. However, another participant suggests that if the credit note indicates a deficient supply, ITC reversal might be required. The eligibility of ITC depends on the credit note's nature and documentation.