Delhi HC issued notice in circular mandating CA certification for proving credit reversal for post sales discount

[CA Bimal Jain]

The Hon’ble Delhi High Court in the case of M/S. JSW STEEL LIMITED VERSUS DIRECTORATE GENERAL OF GST INTELLIGENCE, & ORS. - 2024 (10) TMI 1031 - DELHI HIGH COURT issued notice in the writ petition filed challenging Circular No. 212/6/2024-GST dated June 26, 2024 (“the Circular”) wherein it has been mandated to collect CA/CMA certificate from the recipient ensuring that the credit has been reversed relating to post-sales discount.

Facts:

M/s. JSW Steel Limited (“the Petitioner”) filed a writ petition challenging the Impugned Circular was issued by the Central Board of Indirect Taxes and Customs as well as the Show Cause Notice dated August 02, 2024 (“the SCN”). The Petitioner contended that the Impugned Circular the Petitioner would require to produce a Chartered Accountant (CA)/ Chartered Management Accountant (CMA) certificate relating to every credit note and related transaction of supply.

Held:

The Hon’ble Delhi High Court in the case of M/S. JSW STEEL LIMITED VERSUS DIRECTORATE GENERAL OF GST INTELLIGENCE, & ORS. - 2024 (10) TMI 1031 - DELHI HIGH COURT stated the said issue warrant further consideration and directed the Revenue Department (“the Respondent”) for ruling on the issue during the proceeding pertaining to discount and related to Section 15(3)(b) of the Central Goods and Services Tax Act and therefore, accepted the challenge to Impugned Circular.

Our Comments:

Circular No. 212/6/2024-GST dated June 26, 2024 has been issued for clarification on determination of value of supply made taking into consideration the Post Sales Discount. Further, the Circular states that as there is no mechanism to verify as to whether the credit has been duly reversed by the recipient of goods who has been provided with post sales discount. Therefore, till the time such functionality/facility is not available on the common portal to enable the suppliers as well as the tax officers to verify whether the input tax credit attributable to such discounts offered through tax credit notes has been reversed by the recipient or not, the supplier may procure a certificate from the recipient of supply, issued by the CA or the CMA, certifying that the recipient has made the required proportionate reversal of input tax credit at his end in respect of such credit note issued by the supplier. Such certificate issued by CA or CMA shall contain UDIN (Unique Document Identification Number). The Certificate may include details such as details of the credit notes, the details of the relevant invoice number against which the said credit note has been issued, the amount of ITC reversal in respect of each of the said credit notes along with the details of the FORM GST DRC-03/ return/any other relevant document through which such reversal of ITC has been made by the recipient. However, in case where the amount is less than Rs. 5,00,000/- then instead of CA/CMA certificate, the said supplier may procure an undertaking/certificate from the said recipient that the said input tax credit attributable to such discount has been reversed by him containing aforementioned details. It is pertinent to note that the said certificate/undertaking could be produced before the tax authorities during the proceedings including demand raised in relation to past period.

(Author can be reached at [email protected])