IGST Payable Negative in GSTR1

[Veeramani S]

IGST purchase accounted in May-23 and Input Tax Credit utilized. Due to some issue, the purchase return has to be done in Jul-23, for which by mistake IGST Sale Invoice raised against the same supplier and IGST payable also paid in Aug-23 (instead of reversing the IGST Input Tax Credit for which he should have raised Debit Note against that purchase).

In the month of Sep-23, that Sale Invoice, treated as Sales Return and Credit note raised against that Sale Invoice. This trader usually sell goods within the State only. Now that Sales Return shown in the GSTR-1 in Sep-23 as Negative. All are B2B transactions.

Doubt: Can we adjust that Negative figure (IGST Payable declared as Negative on GSTR-1 in sep-23 ) against IGST Sales if any, in future months or Can we apply for Refund ?

[KALLESHAMURTHY MURTHY K.N.]

Dear Veeramani, S.

Your issue ID - 118831 is read.

What you have written is put into confusion. It is stated that you have raised the tax invoice instead of issuing a credit note against the goods returned. In the second paragraph, stated that the trader sells goods within the state only. Then how IGST is accounted for and availed?

If you raised a tax invoice for returned goods you have to cancel it and a credit/debit note has to be issued.

If the transactions are made within the state, how can you adjust against IGST?

It is presumed that you have purchased goods from an intra-state trader but wrongly availed ITC under IGST but paid tax to the same head by raising a tax invoice for the return of goods to the same person. So, there is no credit in the IGST and hence no need to apply for a refund.

You have to cancel the tax invoice raised against the sales returns. Credit and Debit notes are to be issued appropriately. Amendments to be made in the returns duly intimated to the concerned Tax Authorities.

This reply is made to your query as per my understanding as there are confusing issues made. This is not to be treated as a piece of advice and or may not constitute professional advice or recommendation.

[Padmanathan KV]

Dear Veeramani sir,

I am stating my understanding of the facts from your query:-

1. in May 2023, IGST purchase was made

2. In July 2023, the said purchase was returned

3. In Aug 2023, a IGST sale invoice was made.

5. In Sept 2033, against the sales invoice, you have issued credit note and declared in GSTR-1

Query

Whether you can adjust the IGST in GSTR-3B of subsequent months or apply for refund.

My opinion:-

If you don't have IGST sales regularly as you have mentioned, it is better for apply for refund in my opinion. You need not wait.

Other issue:-

1. Has your supplier issued credit note against the purchase you have made?

2. Have you reversed the IGST credit?

Kindly ensure this compliance as well.

[KALLESHAMURTHY MURTHY K.N.]

Issue Id: - 118831

IGST Payable Negative in GSTR-1

Dear Sir,

In my last reply, I was confused that the seller was a local trader and the Taxpayer had wrongly availed IGST because it was mentioned as an IGST adjustment in future sales.

When he is not making inter-sales trading, it is better to cancel the wrongly raised tax invoice for returned goods. He has not reversed IGST for sales returns. So, the IGST paid has been compensated for the ITC liability under IGST. A negative entry was made in the returns in Sept-2023. It was not specified whether a debit note had been issued or not. If applied for the refund of tax paid, the department will be taken up for audit of books of accounts u/s 65 which may take a long process. So it is better to cancel the tax invoice and not go for the refund but can issue credit/debit notes to appropriate the mistake. When getting set right in his hand alone, why should he go far tying up himself?

[Padmanathan KV]

Dear Kalleshamurthy sir,

Sir, I am unable to follow/agree with certain aspects of your reply:

"If applied for the refund of tax paid, the department will be taken up for audit of books of accounts u/s 65 which may take a long process."

I am not able to find any linkage in provisions between refund under section 54 and audit under section 65. The Audit of books u/s 65 can be done by department even without any refund being filed by tax payer. Practically, audit cases are picked up by system and not by officers is what I understand.

Further as far as refund is concerned, authorities are bound to pass orders within the specified time limit of 60 days. Further the facts in issue are directly covered by Circular 137/07/2020-GST which reads as under:

In case GST is paid by the supplier on advances received for a future event which got cancelled subsequently and for which invoice is issued before supply of service, the supplier is required to issue a “credit note” in terms of section 34 of the CGST Act. He shall declare the details of such credit notes in the return for the month during which such credit note has been issued. The tax liability shall be adjusted in the return subject to conditions of section 34 of the CGST Act. There is no need to file a separate refund claim. However, in cases where there is no output liability against which a credit note can be adjusted, registered persons may proceed to file a claim under “Excess payment of tax, if any” through FORM GST RFD-01.

This circular though in context of advance, fairly clarifies a situation where there is no output liability to be adjusted against credit note, refund can be claimed under "excess payment of tax, if any" category.

"When he is not making inter-sales trading, it is better to cancel the wrongly raised tax invoice for returned goods. He has not reversed IGST for sales returns. So, the IGST paid has been compensated for the ITC liability under IGST. A negative entry was made in the returns in Sept-2023. It was not specified whether a debit note had been issued or not.......So it is better to cancel the tax invoice and not go for the refund but can issue credit/debit notes to appropriate the mistake."

I am not able to find any provision to cancel tax invoice and the only option is to issue credit note. The tax payer has already issued credit note and declared in GSTR-1. However, the issue in this situation, as I understand from the query, is with regard to the issue that it is not possible to declare negative amount in GSTR-3B though negative value is accepted in GSTR-1. Hence, the querist wants to know whether he should adjust in subsequent months if he has positive value in IGST or apply for refund.

[KALLESHAMURTHY MURTHY K.N.]

Dear Sri Padmanathan,

Sir,

I have linked the matter with the audit which was an additional point for the subject matter. Usually, the department refers such cases for audit to verify the correctness of the refund claim. If the auditing authority satisfies, the audit report will be prepared as to whether the refund claim is correct. When the taxpayer can solve the problem at hand, why should he need to go for a refund? Wrongly issued tax invoice required to be cancelled. There are so many cases of cancellation of invoices when wrongly raised. Further, I have seen a case of negative entry made in the return by a taxpayer which was subjected to audit. So, I have explained the consequences.

Thank you very much for responding g to my views.

Regards.

This is not advice but for knowledge purposes.

AI Summary

Trader Issues Wrong IGST Invoice, Experts Advise Correcting with Credit Notes, Warn Against Refund Claims Due to Audit Risks. A trader mistakenly raised an IGST sale invoice instead of a credit note for returned goods, resulting in a negative IGST payable in GSTR-1 for September 2023. The trader, who typically conducts intra-state sales, inquired whether this negative figure could be adjusted against future IGST sales or if a refund should be sought. Respondents suggested canceling the incorrect invoice and issuing appropriate credit/debit notes. One opinion advised applying for a refund if no regular IGST sales occur, while another highlighted potential audit implications of seeking a refund. The discussion emphasized correcting the error through credit notes rather than refunds.