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ITC on Debit Notes-Time Limit

ROHIT GOEL

Dear Experts,

During recent internal audit of Mr. X, it came to notice that in FY 2021-22, rates on some of his sale items was increased from 12% to 18% however he continued to charge old rate of 12% on sale invoices. GSTR--1, 3B and GSTR-9/9C was filed timely by him and credit passed on at 12% only. Now Mr. X intends to correct this mistake and pay differential tax with interest.

Your opinion is required on following:

1. Whether Mr. X can issue debit note to Customers for differential tax of 6% for FY 21-22 now in April 2023? (I could not find any restriction in section 34 about time limit)

2. If yes, whether customers would be able to take ITC of such debit note as per section 16(4)? (As per 16(4), ITC of a invoice or debit note can be claimed till 30th November of year following the year to which the invoice or debit note relates to. Admittedly, debit note relates to FY 2021-22 but is being issued in April 2023, hence the confusion)

Kindly share your valuable views.

Audit Uncovers GST Error: Can Debit Notes Fix 6% Tax Gap and Allow ITC Claims? Experts Weigh In. An internal audit revealed that Mr. X charged an incorrect GST rate of 12% instead of 18% on sales in FY 2021-22. He plans to issue debit notes for the 6% differential tax in April 2023 and seeks advice on whether this is permissible and if customers can claim Input Tax Credit (ITC) on these notes. Experts confirmed that there is no time limit for issuing debit notes, and customers can claim ITC based on the debit note's date, not the invoice date. However, issues regarding interest liability on such debit notes may arise. (AI Summary)
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