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CA Final · Indirect Tax Laws · Miscellaneous Provisions (GST)

Anand Pharma had a contract before the appointed day with Zenith Hospitals. After the appointed day, the price was revised downwards by ₹1,50,000 and Anand Pharma issued a credit note within thirty days. Anand Pharma wants to reduce its output tax liability by the tax on this amount. Which condition must be satisfied?

Anand Pharma can reduce its tax liability only if Zenith Hospitals, the recipient of the credit note, has reduced its input tax credit by the corresponding amount. The credit note must also be issued within thirty days of the price revision.

  1. AZenith Hospitals must have reduced its input tax credit corresponding to the reduction in tax liabilityCorrect
  2. BThe Commissioner must approve the credit note in advance
  3. CZenith Hospitals must be an unregistered person
  4. DThe credit note must be issued within six months of the revision

Explanation

The proviso allows reduction of tax liability on a credit note only if the recipient has reduced the input tax credit corresponding to that reduction. Option D is wrong because the period is thirty days. No Commissioner approval is required.

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