ITC reversed in auto populated ITC in GSTR 3B on credit notes with ITC availability as NO

[Vaishnavi Bubesh]

Dear Experts,

We are having one query regarding ITC auto reduced in auto-populated GSTR-2B amount in GSTR-3B in respect of the credit notes with ITC availability as NO in GSTR 2B due to the reason 'POS lies outside the recipient state'.

The question is why department is seeking the reversal/reducing the ITC on credit notes even when ITC was not available in respect of original invoices having ITC eligibility as NO due to same reason.

It is resulting in double reduction of ITC i.e., on original invoice ITC is unavailable in GSTR-2B due to POS lying in different state as recipient state as well as ITC is reduced on account of credit note issued against the original invoice.

Thanks in advance

AI Summary

Query on Double ITC Reduction Due to Credit Notes in GSTR-3B; Experts Suggest Reporting Portal Flaw. A participant raised a query regarding the automatic reduction of Input Tax Credit (ITC) in GSTR-3B due to credit notes marked with ITC availability as 'NO' in GSTR-2B. The issue arises because the Place of Supply (POS) is outside the recipient's state, leading to ITC being unavailable on the original invoice. This results in a double ITC reduction. An expert advised that this is a portal flaw and suggested removing the credit note's effect while informing the department and keeping records for future reference.