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.

[Shilpi Jain]

Against each credit note indicate what is the reason for issuance and produce supporting documents to prove it is for a reason permissible u/s 34 and the condition of s. 15(3) are fulfilled, if applicable.

If it is possible to get declarations from recipients, better to provide them to close out the matter fast. If that is not feasible you can surely argue that the circular should be regarded as prospective.

[Rajagopal K]

Respected Madam,

Thanks a lot for your immediate response. 

AI Summary

Credit note compliance: document reasons and evidential support to justify output tax reduction under GST. For each credit note prove eligibility under Section 34 by supplying original invoices, delivery challans, contract or order amendments, correspondence, accounting entries and GSTR 1 disclosures showing issuance in FY 2021-22; where adjustments depend on post supply price changes, produce evidence fulfilling the conditions of Section 15(3)(b); where possible obtain recipient declarations and show any reversal of input tax credit.