GST on ITC reversal recovered from supplier

[Kaustubh Karandikar]

XYZ availed input tax credit on goods supplied by the supplier. However, details of the corresponding tax invoice were not getting reflected on the GST portal under Return GSTR – 2A / 2B. Therefore, XYZ reversed the input tax credit and the amount of input tax credit reversed was recovered from the supplier through debit note. Is XYZ required to pay GST on the amount recovered from the supplier?

[Amit Agrawal]

No, in my humble view, with an understanding that amount so recovered as 'reduction in purchase-value' and not 'income' per se.

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

[Shilpi Jain]

The debit note issued will not be a document as required under the GST law since under GST law DN can be issued by supplier only.

In this case there is no supply by XYZ when it is adjusting the ITC ineligible.

It can at the most be regarded as a reduction in price

AI Summary

GST on ITC reversal: recovered amounts may be treated as reduction in purchase value, not taxable income. Whether GST arises on amounts recovered from a supplier after a recipient reverses input tax credit and recovers the sum via a debit note. One view treats the recovered amount as a reduction in purchase-value not taxable as income. An alternative view notes a debit note issued by the recipient is not a GST document (debit notes may be issued by the supplier only) and such adjustment should be regarded as a reduction in price rather than a supply.