Claim of GST ITC - Against own Credit Note

[Ashish Jain]

A company dealing in apparel has supplied goods to modern trade like big bazaar, reliance retail, metro etc in FY 2018-19. Such unsold products after sales are returned by the customer back to the company.

In the above case, at the time of return of goods back to the company, credit note was issued against multiple tax invoice. Since in the FY 2018-19, there was no provision in GSTR1 to report credit note without reference of original invoice, the company claimed ITC on such sales returns. Now the department is seeking reversal of ITC claimed as ineligible. What are the remedies to the same?

AI Summary

Credit note validity for ITC may be contested by asserting revenue neutrality and furnishing documentary proof to authorities.
Dispute arises from claiming ITC on sales returns where credit notes were issued; department treats credit notes as invalid documents for ITC under Section 16(2)(a) and seeks reversal. Taxpayers should document returns with books, stock entries, delivery challans, P&L and payment records to show revenue neutrality, consider refund remedies where applicable, and, if required, pursue appellate remedies. Reporting constraints in GSTR 3B led many taxpayers to record negative adjustments as ITC rather than reduce output tax.