Skip to content

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

Verma Traders issued a credit note within thirty days after a downward price revision on or after the appointed day, under a pre-appointed-day contract. The credit note reduces output tax by Rs 9,000. Its customer, Rao Enterprises, has not reduced its input tax credit. What is the position of Verma Traders?

Verma Traders can reduce its tax liability only if the recipient, Rao Enterprises, has reduced its corresponding input tax credit. Since Rao has not, Verma cannot claim the Rs 9,000 reduction. The credit note is permitted, but the liability reduction is conditional on the recipient's reversal.

  1. AVerma may reduce its tax liability by Rs 9,000 regardless of the recipient's position
  2. BVerma may reduce its tax liability only if Rao has reduced its input tax credit corresponding to the reductionCorrect
  3. CVerma cannot issue any credit note for pre-appointed-day contracts
  4. DVerma may reduce liability by half of Rs 9,000

Explanation

The proviso allows the registered person to reduce tax liability on account of the credit note only if the recipient has reduced the corresponding input tax credit. Rao has not done so, so Verma cannot reduce its liability yet. Option A ignores the condition.

Did you get it right without looking?

One question tells you little. A timed set on Miscellaneous Provisions (GST) shows your real accuracy, how long you take and where you lose marks.

Practise Miscellaneous Provisions (GST)Free diagnostic mock

More Miscellaneous Provisions (GST) questions