GST: Govt likely to Grant 2 Months Window for Credit Note’s ITC
It is anticipated that the government will modify the CGST Rules, allowing consumers to accept or reject a credit note and modify their ITC for a maximum of two months.
The government is anticipated to amend the Central GST (CGST) Rules, providing goods and services recipients with up to two months to accept or reject a credit note and modify the input tax credit, which will greatly alleviate the burden on goods and services tax (GST) payers. GST READY RECKONER: Complete Topic wise Circulars, Instructions & Guidelines, Click here Currently,...
The government is anticipated to amend the Central GST (CGST) Rules, providing goods and services recipients with up to two months to accept or reject a credit note and modify the input tax credit, which will greatly alleviate the burden on goods and services tax (GST) payers.
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Currently, credit notes must be explicitly accepted or rejected by taxpayers using the Invoice Management System (IMS). While preventing financial hardship, the legislation will give taxpayers greater options. The vendor will give the consumer a credit note to reduce the amount owed or to be applied to future payments in the event of sales returns, discounts, or overbilling.
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Businesses can claim ITC with the help of the IMS, an automated system that tracks and validates their invoices. The system was made available by the Center in October. The credit note can now be held outstanding by the recipient of goods and services for a single tax period (one month, as GST returns are filed on a monthly basis), according to the officials. The credit note will remain in pending mode for an additional month, but no more, if the tax return is not filed on time.
Although it is currently optional, most major GST payers make use of the IMS. The official claims that the proposed action is a step in the right direction toward requiring the IMS eventually. Because the Finance Bill, 2025, intends to change the CGST Act to require suppliers to ensure the reversal of ITC earned by recipients in order to minimize their own (suppliers’) tax burden, the CGST Rules must be amended.
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According to an analyst, credit notes—the most crucial component of IMS—have impacted the 15 million GST taxpayers, both big and small.
Every modification to the tax code has a catch. In this case, one will have to pay interest for a month if the recipient accepts the credit note in the subsequent tax period after keeping it outstanding. Business needs to be adequately prepared because this would be a dampener.
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