Chapter IX (Sections 37-48) of the Central Goods and Services Tax (CGST) Act, 2017 deals with provisions related to Accounts and Records. Section 42 of Central Goods and Services Tax Act, 2017 (12 of 2017) provides for matching, reversal and reclaim of input tax credit under CGST Act 2017.
Recently, we have discussed in detail section 41 (i.e. Claim of input tax credit and provisional acceptance thereof) of CGST Act 2017. Today, we learn the provisions of section 42 of the CGST Act 2017. Complete Details of CGST Section 42 – Matching, reversal and reclaim of input tax credit. You may CLICK HERE to download list of all sections of CGST Act 2017 in PDF format.
Notes on Section 42 of CGST Act 2017
Section 42 of CGST Act 2017 shall come into force on 01.07.2017 except the proviso to sub-section (9) of section 42 vide Notification No. 9/2017 – Central Tax, G.S.R. 658(E), dated 28.06.2017. In this note, you will learn detail of the provisions of section 41 of CGST Act 2017 read with Central GST Rules 2017.
Section 42(1): The details of every inward supply furnished by a registered person (hereafter in this section referred to as the “recipient”) for a tax period shall, in such manner and within such time as may be prescribed, be matched––
(a) with the corresponding details of outward supply furnished by the corresponding registered person (hereafter in this section referred to as the “supplier”) in his valid return for the same tax period or any preceding tax period;
(b) with the integrated goods and services tax paid under section 3 of the Customs Tariff Act, 1975 in respect of goods imported by him; and
(c) for duplication of claims of input tax credit.
Section 42(2): The claim of input tax credit in respect of invoices or debit notes relating to inward supply that match with the details of corresponding outward supply or with the integrated goods and services tax paid under section 3 of the Customs Tariff Act, 1975 in respect of goods imported by him shall be finally accepted and such acceptance shall be communicated, in such manner as may be prescribed, to the recipient.
Section 42(3): Where the input tax credit claimed by a recipient in respect of an inward supply is in excess of the tax declared by the supplier for the same supply or the outward supply is not declared by the supplier in his valid returns, the discrepancy shall be communicated to both such persons in such manner as may be prescribed.
Section 42(4): The duplication of claims of input tax credit shall be communicated to the recipient in such manner as may be prescribed.
Section 42(5): The amount in respect of which any discrepancy is communicated under sub-section (3) and which is not rectified by the supplier in his valid return for the month in which discrepancy is communicated shall be added to the output tax liability of the recipient, in such manner as may be prescribed, in his return for the month succeeding the month in which the discrepancy is communicated.
Section 42(6): The amount claimed as input tax credit that is found to be in excess on account of duplication of claims shall be added to the output tax liability of the recipient in his return for the month in which the duplication is communicated.
Section 42(7): The recipient shall be eligible to reduce, from his output tax liability, the amount added under sub-section (5), if the supplier declares the details of the invoice or debit note in his valid return within the time specified in sub-section (9) of section 39.
Section 42(8): A recipient in whose output tax liability any amount has been added under sub-section (5) or sub-section (6), shall be liable to pay interest at the rate specified under sub-section (1) of section 50 on the amount so added from the date of availing of credit till the corresponding additions are made under the said sub-sections.
Section 42(9): Where any reduction in output tax liability is accepted under sub-section (7), the interest paid under sub-section (8) shall be refunded to the recipient by crediting the amount in the corresponding head of his electronic cash ledger in such manner as may be prescribed:
Provided that the amount of interest to be credited in any case shall not exceed the amount of interest paid by the supplier.
Section 42(10): The amount reduced from the output tax liability in contravention of the provisions of sub-section (7) shall be added to the output tax liability of the recipient in his return for the month in which such contravention takes place and such recipient shall be liable to pay interest on the amount so added at the rate specified in sub-section (3) of section 50.