Query relating to finacial credit note

Supplier: Can issue a financial credit note for the cash discount, but cannot reduce their GST liability.

Recipient: Is not required to reverse the ITC because the original tax paid to the government remains unchanged.

Key Condition: This applies specifically to financial/commercial credit notes where no GST adjustment is made. If a GST-compliant credit note were issued (which would require meeting specific conditions like prior agreement), then the supplier could reduce their tax liability, and the recipient would then be required to reverse the proportionate ITC.