In the case of Hindustan Unilever Ltd, the Rajasthan High Court directed to suggest a mechanism to match the supplier’s credit note with Input Tax Credit (ITC)reversal due to the omission of section 43 of the Central Goods and Service Tax Act, 2017.
The petitioner raised an issue about the absence of a proper mechanism for matching of credit note of the supplier with the ITC reversal by the recipient. It appeared that earlier there was a provision under Section 43 of the CGST Act / RGST Act obligating the matching exercises to be undertaken by the department. That provision later on has been omitted.
The petitioner submitted that it is not practically possible for the petitioner to submit a certificate after obtaining the same from the recipient as proof of reversal of credit by the recipient, to avail of reduction of tax liability. Instead, it is for the department to undertake the matching exercise and the claim of reduction in tax liability should not be made dependent upon the production of any certificate or proof of reversal of ITC by the recipient.
It was found that the validity of the provision is being challenged more on the grounds of workability. A division bench comprising Justice Manindra Mohan Shrivastava and Justice Praveer Bhatnagar viewed that in the absence of their being any statutory obligation cast on the respondent to undertake matching exercise if the petitioner is willing to claim a reduction in tax liability, proof of reversal by the recipient is to be provided by the supplier.
The petitioner has challenged the validity of the provision more on the grounds of difficulty in collecting such certificate/proof from the recipient.
Further, the Union of India is directed to place before the Court the appropriate suggested mechanism.
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