Credit note issued but not amended in GSTR1 return accordingly

[Sudhir Kumar]

One client has issued credit note but not shown the same in GSTR-1 return under section 34. They have shown the credit note in annual return GSTR-9. Department has issued the demand denying that credit note has not been shown in R1 during the period under questions. What the step the client should take.

 

[Ganeshan Kalyani]

The books of accounts is the main record. You produce the entry in the books of account and also copy of credit note and explain the reason for not furnishing in GSTR-1.

[KASTURI SETHI]

I agree with Sh.Ganeshan Kalyani Ji. I further add that books of accounts are a statutory records and very much basis of all transactions and entries in GST Returns.

[Padmanathan KV]

GST can be levied only on supply of goods or services or both at the transaction value. Merely because GSTR-1 reflects a higher value, GST cannot be levied on the same. This is the underlying principle.

The actual supply and transaction value has to be proved from your books of accounts as mentioned by experts as above. So kindly reconcile the payment in GSTR-3B with sales register.

[Sudhir Kumar]

But issue is, if the supplier has not amended the outward supply in GSTR-1 and the same is reflected in GSTR-2A of the recipient, the recipient can avail ITC of the reflected amount, but here the outward supply has been shown less by issuing credit note and made payment in GSTR-3B accordingly, however the taxpayer in annual return GSTR-9 shown the less outward supply by taking into account the credit note.

[Shilpi Jain]

What is this credit note issued for? A discount?

if yes, a condition for reducing outward liability is that the recipient should have not taken ITC. Ensure that is satisfied.

Also, whether this CN was reduced in GSTR-3B? and not merely in GSTR-9

AI Summary

Client's Credit Note Error in GSTR-1 Leads to Tax Demand; Books of Accounts Key for Resolution Under Section 34. A client issued a credit note but failed to reflect it in the GSTR-1 return under section 34, instead showing it in the annual GSTR-9 return. The tax department issued a demand due to this omission. Experts advised that the client should rely on their books of accounts as the primary record, providing evidence of the credit note and explaining its absence in GSTR-1. They should reconcile the payment in GSTR-3B with the sales register. Additionally, it's crucial to ensure that the recipient hasn't claimed Input Tax Credit if the credit note was for a discount.