212/06/2024-GST — Clarification on mechanism for providing evidence of compliance of conditions of Section 15(3)(b)(ii) of the CGST Act, 2017 by the suppliers
Summary
This new circular, issued by the CBIC, clarifies how suppliers can prove they've met the conditions to get a deduction in the taxable value of goods or services when passing on discounts to their customers after a supply has been made. This is specifically related to Section 15(3)(b)(ii) of the CGST Act, which deals with post-supply discounts that weren't necessarily agreed upon before the supply took place. The key condition is that the customer is required to reverse the input tax credit (ITC) attributable to the discount.
In essence, the circular aims to streamline the process for suppliers to demonstrate that their customers have indeed reversed the relevant ITC. Suppliers now need to obtain a self-declaration from their customers confirming they have reversed the ITC. This self-declaration must contain specific details, including the GSTIN of both the supplier and the customer, the relevant invoice numbers, the amount of discount given, and the amount of ITC reversed.
This impacts businesses supplying goods or services where post-supply discounts are common. They must now ensure they obtain this self-declaration from their customers. While the circular is effective immediately, the good news is that it simplifies compliance by providing a standardized method for suppliers to prove the required ITC reversal. There are no explicitly stated deadlines for acquiring the self-declaration, but it is obviously prudent to get it from customers as quickly as possible to ensure proper GST compliance and avoid potential disputes or penalties.
Key Changes
| Change | Impact |
|---|---|
| Supplier Declaration replacing previous procedures for proving Section 15(3)(b)(ii) compliance. | Simplifies the process for suppliers to demonstrate that the recipient has reversed the input tax credit (ITC) where the supplier has not received payment within 180 days, shifting the onus of providing detailed recipient-side documentation. |
| Format and Content of the Supplier Declaration prescribed. | Provides a standardized format (Annexure A) ensuring consistency and ease of verification by tax authorities. Specifies the information required in the declaration, like GSTIN, invoice details, and confirmation of recipient ITC reversal. |
| Relaxation of strict documentary evidence requirements from recipient. | Reduces the burden on suppliers to obtain and maintain detailed recipient-side documentation (like recipient's ledger extracts or communication records confirming ITC reversal). Reliance is primarily placed on the supplier's declaration. |
| Emphasis on authenticity and veracity of the Supplier Declaration. | Suppliers are responsible for the accuracy of the declaration. Any false declaration can lead to penalties and other consequences under the GST law. Tax authorities retain the right to verify the information declared. |
| Application to ongoing assessments and audits. | The circular applies to pending assessments and audits, meaning tax officers must consider the supplier's declaration as sufficient evidence (subject to verification) for demonstrating compliance with Section 15(3)(b)(ii). |