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

Patel Pharma, registered, revised downward the price of goods supplied under a pre-appointed-day contract and issued a credit note within thirty days of the revision. Under Section 142(2)(b), when can Patel Pharma reduce its tax liability on account of this credit note?

Patel Pharma can reduce its tax liability only if the recipient of the credit note has reduced its input tax credit corresponding to that reduction. Section 142(2)(b) makes the supplier's relief conditional on this matching reversal, not on issuing the note alone.

  1. AOnly if the recipient has reduced the corresponding input tax creditCorrect
  2. BAutomatically on issue of the credit note
  3. COnly after the Commissioner approves the credit note
  4. DOnly if the recipient is an unregistered person

Explanation

The proviso to Section 142(2)(b) allows the supplier to reduce its tax liability for the credit note only if the recipient has reduced its input tax credit corresponding to the reduction. Issuing the credit note alone is not enough. Commissioner approval is not required by the text.

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