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

Reverse charge on imported services: ITC reversal hinges on whether the supplier credit note reduces taxable consideration.
When a supplier issues a credit note reducing an earlier invoice for imported services paid under reverse charge, entitlement to Input Tax Credit depends on the credit note's character: a Tax Credit Note reducing the supplier's taxable liability affects recipient ITC, while a Financial Credit Note treated as a book adjustment that does not reduce supplier tax liability does not automatically require ITC reversal; for reverse charge entries the usual payment within period proviso is not applicable, making documentation and the reason for the credit note decisive.