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

[Shilpi Jain]

This is a flaw in the portal. You can proceed to remove the effect of the credit note.

Ensure you make an intimation for this to the dpeartment and keep it in your records so that tomorrow if the department questions the difference in ITC this intimation can be shown.

AI Summary

Input tax credit reversal on credit notes causes double reduction; correct portal error and notify the tax department. Reversal of input tax credit in auto populated GSTR 3B for credit notes marked as No ITC in GSTR 2B due to Place of Supply outside the recipient state results in double reduction; the portal defect should be corrected by removing the credit note effect, documenting the adjustment and intimating the tax department to preserve an audit trail for any future queries.