Differential GST rate claimed by Vendor

[JOHN SHANNEL]

Hi Experts,

One of my vendor has been charging me 12% GST for the last 2 years. And due to his assessment with GST authorities he got clarity that the item was supposed to fall under 18% GST rate. Now he is asking me to pay the 6% differential GST of the last 2 years.

Am i liable to pay the same. If yes can i claim ITC in current year?

[KASTURI SETHI]

On which dates Annual Returns were filed for both years ?

[KASTURI SETHI]

As per Section 9 (1) of CGST Act, a registered person is required to collect GST from his buyer of goods or recipient of service and deposit the same with Govt. So you are required to pay the differential amount of tax to your vendor for further deposit into Govt. account. The recovery is within time limit.

[Ganeshan Kalyani]

Your vendor will raise supplementary invoice, only for tax amount and basis which you can claim the credit subject to section 16(4) timeline.

[Georgia ava]

So you are required to pay the differential amount of tax to your vendor for further deposit into Govt. account. The recovery is monkey type    within time ... Goods and services in India fall under different GST slabs: 0% for essential items, 5% for basic necessities, 12% for standard goods, 18% for most consumer products, and 28% for luxury and sin goods. What is the difference between Section 73 and Section 74 of the CGST Act? Section 73 applies to any tax liability when there is no suspicion of fraud, wilful misstatement or suppression of facts. Section 74 applies to a tax liability only when there is a suspicion of fraud, wilful misstatement or suppression of facts

[YAGAY andSUN]

These are statutory dues which are required to be paid by your vendor along with interest at applicable rate and GST Department also impose penalty on your vendor.  However,  you would have to pay the differential tax to your vendor but in such scenario if a SCN was issued, the it will become bit difficult to avail ITC on such transactions.

Please do check your agreement/contract with your vendor regarding any written clause is mentioned in such scenarios or not, if it is mentioned that how such clauses will work out for you.

[KASTURI SETHI]

As per Section 34(3) in such a situation a debit note is required to be issued. If supplementary invoice is issued that should be supported by a debit note. A debit note is a valid document for availing ITC as per Rule 36 (c). Sh. Ganeshan Kalyani, Sir has rightly advised to issue supplementary invoice. Further Explanation to Section 34 (4), debit note includes supplementary invoice also. Supplementary invoice is also invoice and it is not independent of original invoice. Date of supplementary invoice coupled with date of debit note CAN help the querist in avoiding the sword of time limit prescribed under Section 16(4)

[KASTURI SETHI]

In this scenario, the date of debit note will be a determinant  factor and will counteract Section 16(4) for the purpose of availment of ITC on the differential amount of tax to be paid.

[Yash Shah]

As per sub-section 3 of section 34, [Where one or more tax invoices have] been issued for supply of any goods or services or both and the taxable value or tax charged in that tax invoice is found to be less than the taxable value or tax payable in respect of such supply, the registered person, who has supplied such goods or services or both shall issue to the recipient [one or more debit notes for supplies made in a financial year] containing such particulars as may be prescribed.

As per section 16(4) of the CGST Act, "A registered person shall not be entitled to take the input tax credit in respect of any invoice or debit note for the supply of goods or services or both after the [thirtieth day of November] following the end of the financial year to such invoice or debit note pertains or furnishing of the relevant annual return, whichever is earlier."

As per the above section, the supplier can issue the debit note to the recipient if any amount of taxable value or tax payable is less than the amount of taxable value or tax payable on such supply. In our case, the tax rate charged by the supplier is less than the rate on such supplies. therefore he can raise a debit note and also in our case, a debit note shall be issued by the supplier in the current financial year hence ITC can be claimed for a debit note till the time limit prescribed in section 16(4).

[JOHN SHANNEL]

thanks you all for your inputs. My understanding are as follows,

I can ask the supplier to give me debit note dated current financial year , by referring to the invoices which are 2 year old. I can avail the value of debit note in my current month/year ITC.  

[Shilpi Jain]

Recovering GST from the recipient is a matter of the contractual clauses. In case your contract / agreement / PO with the supplier only mentions that you are liable to pay the applicable taxes then he is right in claiming the additional GST.

Though if such document has put a limited liability clause as per which the supplier is not allowed to claim any additional amount after the supply is made, then the additional GST cannot be recovered from the customer.

That is why contract clauses are very important

Even if claimed and paid to the supplier on the strength of debit note, ITC can be claimed as time limit to claim ITC will be seen from date of debit note and not the original invoices. However, please also ensure that the said tax is not demanded by the department from your supplier u/s 74 and which period this demand belongs to. This is for the reason that for sometime tax paid u/s 74 was not an eligible credit.

AI Summary

Input tax credit eligibility hinges on debit note timing; recipient may be liable to pay differential GST to supplier. Vendor can recover under charged GST by issuing a supplementary invoice or debit note, which serves as the documentary basis for the recipient to pay the differential and for the supplier to deposit tax and interest. The recipient may claim input tax credit on that differential only if the debit note/supplementary invoice is valid and issued within the statutory time limits tied to the relevant financial year and annual return. Contractual clauses may allocate commercial liability, and fraud related departmental demands can affect credit eligibility.