Rate reduction Credit Note without GST

[Vilas Choudhari]

Dear Sir/Ma'am,

I wish to withdraw your attention that one of our customer Tata Motor has reduced rate retrospectively . Accordingly we raised Credit Note with GST as regular and reduced our GST liability. I have cleared here it is not Cash Discount or Trade discount . Whereas Tata Motor passed debit note without GST and not inform us. TATA Motors not issued debit notes to us. It has created mismatch in books of Account.

Now Tata Motor is demanding GST along with @18% interest and hold our regular payment.

Can you someone give me clarity ? U/s 34 of GST Act say Credit Note.

Is it any provision in GST Act issue credit note without GST (except Cash Discount and Trade Discount.)

Please give an advice for the same.

Your response will be highly appreciate

[Amit Agrawal]

Issuance of credit-note u/s 34 (1) is optional. And in place of credit-notes u/s 34 (1), you can issue "accounting" credit-notes to settle books of accounts.

It is my understanding that your customer is asking you to pay the GST amount with interest, presumably because they have not books your credit-notes in their books earlier and thereby, they have NOT reversed ITC against your credit-notes.

I see at-least two solutions to this:

Whether GST portal is allowing you to cancel credit-notes u/s 34 (1) so issued OR make tax amount therein as zero? If yes, you can do that & pay back tax-amount (i.e. against re-credit taken earlier) - preferably in cash with interest to avoid another reason of controversies / disputes with Dept - while filing return.

Another option is that you can request your customer to reverse the proportionate ITC (against your credit-notes u/s 34 (1)) and make accounting debit-note for differential amount (in addition to earlier debit-note). This will match the books of accounts. If you want (for maintaining business reasons or if you have not presented those credit-notes to your customer in time etc.), you can also agree to bear cost of 'interest' to be paid by your customer towards delay in reversing ITC.

If none of above option works or acceptable to your customer, please let me know the reasons / difficulties to follow any of these options. And I will see what can be really done.

These are ex facie views of mine and the same should not be construed as professional advice / suggestion.

[Shilpi Jain]

Credit note can be issued without gst as well. Issuing gst credit note requires fulfilling conditions set out in section 15(3).

[Amit Agrawal]

In my views, credit-notes with gst - u/s 34 (1) - can be issued for many situations in addition to 'post-sale discount covered u/s 15 (3)'.

However, for issuance of credit-notes with gst u/s 34 (1) against these ''post-sale discount", conditions specified u/s 15 (3) needs to be fulfilled.

These are ex facie views of mine and the same should not be construed as professional advice / suggestion.

AI Summary

Issuance of credit-note optional; reconcile GST mismatches by cancelling portal credit or reversing ITC and issuing accounting debit. Issuance of a credit-note under section 34(1) is optional and parties can use accounting credit-notes to settle books without creating tax liability. Remedies include cancelling or amending the GST portal credit-note or making its tax component nil and repaying tax with interest, or requesting the customer to reverse the proportionate input tax credit and record an accounting debit-note for the differential; credit-notes without GST may be issued where post-sale adjustment conditions under section 15(3) are not satisfied.