Supporting Documents Required for GST Notice on Credit Notes – FY 2021–22

[Rajagopal K]

Dear Experts,

One of our clients has received a notice from the GST Department regarding output tax liability reduction through credit notes for FY 2021–22. The department has questioned the eligibility of these credit notes under Section 34 and Section 15(3)(b) of the CGST/TNGST Act, 2017.

Key Points from the Notice:

1. Credit notes were issued during FY 2021–22.
2. The department assumes that some of these credit notes pertain to supplies made in FY 2020–21.
3. It has asked the client to justify the reduction in output tax liability and confirm that:

• The credit notes comply with Section 34.
• The conditions under Section 15(3)(b) (especially regarding post-supply discounts) are fulfilled.
• The recipient has reversed input tax credit (ITC) where applicable.
• The department appears to be relying on Circular No. 212/6/2024-GST, dated 26-06-2024, issued by CBIC.

Clarification from Our End:

• All credit notes were issued for supplies made within FY 2021–22 only.
• All credit notes were properly disclosed in GSTR-1 under the Credit Notes section in the respective months of issuance.
• As per our understanding, Circular No. 212/6/2024-GST clearly states that it is applicable only for FY 2023–24 onwards, and not retrospectively applicable to FY 2021–22.

Query:

What are the key supporting documents that should be prepared and submitted to respond effectively to this notice, especially given that the cited circular does not apply to FY 2021–22?

Any clarification on handling such departmental misapplication of circulars would also be appreciated.

Thank you in advance.

AI Summary

Chronology and documentary proof of FY 2021-22 supplies and credit notes; argue circular not retrospective; request review Provide a chronology and documentary proof showing supplies and adjustments occurred in FY 2021-22: issued credit notes (copies), original tax invoices, related supply contracts or purchase orders, delivery proofs/GRNs, GSTR-1 filings and monthly/annual returns reflecting the credit notes, ledger reconciliations tying credit notes to invoices, bank statements/receipts showing refunds or adjustments, evidence of recipient ITC reversal where applicable, internal credit-note approval memos and communications with recipients, and timing worksheets demonstrating issuance dates. Also prepare a concise legal position and timeline arguing the cited circular's non-retrospective applicability to FY 2021-22 and requesting review of its application to these facts.