Issue of Credit Note on invoices raised for interest portion and gst discharged to the Government

[DHARIWAL AND SREENIVAS]

One of our clients has raised an invoice for interest payable for the delayed payment in respect of the original supply.  As they have raised an invoice charging GST on the interest value.  Presently, the interest amount is not received from customers, and customers are not willing to pay the interest.  Whether the client can raise a credit note for cancelling invoices raised for the interest portion.  Whether a credit note can be raised for this type of transaction.  Is there any legal way to reduce the gst amount discharged to the Government for the reason that amounts were not received (in respect of interest portion) from customers?     

AI Summary

Issuing credit notes to cancel GST on interest and adjust already-paid GST: effect and compliance limits Whether a credit note may be issued to cancel GST charged on interest and whether GST already discharged can be reduced are the dominant issues. Under GST rules a supplier may issue a credit note to alter taxable value where the taxable supply consideration is reduced or not realized, and issuance of such credit notes operates to adjust the supplier's output tax liability and permit reversal or refund of tax paid to the extent of the reduction; the operative effect is reduction of taxable turnover and corresponding tax liability upon proper issuance and reporting of the credit note. Where tax was already paid despite non-receipt of consideration, the operative effect is that the supplier must follow return-amendment, credit-note reporting and documentary/time-limit requirements to claim adjustment or refund; absent compliance, the tax discharged remains payable.