Reversal of Shortage and Discount received

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This query is : Resolved

Quick Summary

This discussion explores GST implications when receiving credit notes for purchase shortages or cash discounts, particularly when these notes don't include GST. It questions whether input tax credit (ITC) needs reversal in such cases. While some argue no reversal is needed if GST isn't on the credit note, there's a risk of litigation due to not paying full consideration. For shortages, reversing ITC is generally advised.

CA Parul Saxena

CA Parul Saxena (Querist)

18 July 2020 1.Cash discount is received by way of credit note but GST is not there in Credit note...still we are supposed to reverse the input on Cash Discount received??
2.Credit note for Shortage received on Purchase made by us. But GST is not there in Credit note...still we are supposed to reverse the input on Shortage??

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)

18 July 2020 1 and 2 no need for GST reversal as GST is not there in credit note.

Lekhraj sood

Lekhraj sood (Expert)

18 July 2020 1. ITC reversal not to be done but there can be litigation exposure as you are not paying the full consideration.
2. Since the quantity received is less, you have to reverse the ITC in respect of shortage.

CA Parul Saxena

CA Parul Saxena (Querist)

20 July 2020 R Seetharaman Sir can you please share the provision under which the counter party is not reflecting GST portion in Credit Note? I want to know why they are doing so?

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)

20 July 2020 See the link.
https://www.google.com/amp/s/taxguru.in/goods-and-service-tax/credit-note-discount-gst-impact-itc-recipient-goods-services.html%3famp

CA Parul Saxena

CA Parul Saxena (Querist)

20 July 2020 please explain in short

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