Skip to content

CS Executive · Tax Laws and Practice · Procedural Compliance under GST

Ananya Traders issued a tax invoice to Bharat Retail and later issued a credit note for deficient goods. Bharat Retail had already recovered the tax and interest from its own customers, so the incidence was passed on. What is the consequence for Ananya Traders under Section 34(2) of the CGST Act, 2017?

No reduction in Ananya Traders' output tax liability is permitted. The proviso to Section 34(2) bars the reduction where the incidence of tax and interest on the supply has been passed on to any other person, even though the credit note itself was validly issued.

  1. AOutput tax liability is reduced only by half of the tax in the credit note
  2. BOutput tax liability is reduced after a one-month delay
  3. CNo reduction in output tax liability is permitted, since incidence of tax and interest has been passed on to another personCorrect
  4. DOutput tax liability is reduced fully, as the credit note is validly issued

Explanation

The proviso to Section 34(2) says no reduction in the supplier's output tax liability is permitted if the incidence of tax and interest on the supply has been passed on to any other person. Valid issuance of the credit note is not enough, so full reduction is wrong. The Act provides no partial or delayed reduction.

Did you get it right without looking?

One question tells you little. A timed set on Procedural Compliance under GST shows your real accuracy, how long you take and where you lose marks.

Practise Procedural Compliance under GSTFree diagnostic mock

More Procedural Compliance under GST questions