CREDIT NOTE RECEIVED AGAINST REVERSAL OF ITC ON EARLIER RETURN

Dear Sir,

I am received a Construction Bill from Contractor with GST in Month of February 26. I am not taking the ITC due to my bussiness segment is different so I reverse the ITC against Rules 38, 42, 43 CGST. 

Now the Same Contractor issue me a Credit Note against the earlier bill, If I accept the Credit Note - I have to pay the GST amount in the month of March although I am not taking the ITC in the earlier bill - How tackle the Issue - Please Advise - Urgent

Replies (3)
Quick Summary
If ITC was not availed or already reversed, a supplier's credit note doesn't create GST liability. Ensure no double adjustment-reconcile invoice, reversal, and credit note in GSTR-3B to reflect correct ITC.

If ITC on the original invoice was not availed, or if availed was already reversed, receipt of the supplier’s credit note does not create any fresh GST payment liability for the recipient. The credit note only reduces the supplier’s tax/value subject to Section 34. Practically, please ensure the same tax is not reduced twice in your books/returns because GST credit notes flow into GSTR-3B Table 4(A) on net basis, while Rule 42/43 reversals are separately reported in Table 4(B). Therefore, reconcile the original invoice, earlier reversal, and the present credit note so that only the net eligible/ineligible ITC remains reflected.

Sir I have no purchase/input in the month of March, My GSTR -3B shown negative figure so I reject the credit note of Contractor and I file my GST with actual liabilities.

The credit note from the contractor after ITC reversal does not undo the reversal you already did in GSTR-3B, those are two separate adjustments. The reversal you recorded reduces your ITC in Table 4(B), and if the contractor now issues a credit note, that reduces their output tax and appears in your GSTR-2B as a negative supply. You claim that reduction through Table 4(A) of GSTR-3B in the relevant period. Our [GST input tax credit guide](https://taxgarden.in/blog/gst-input-tax-credit-eligibility-gstr-2b-reconciliation) covers ITC reversal and reclaim treatment with reconciliation steps.

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