Brief of Circular No.-212/6/2024-GST dated 26-06-2024 suggested certificate formats

Mr. B. Venkateswaran I.R.S, Assistant Commissioner, Central GST (Retired) presented his note on the Circular no. 212/6/2024 dated 26.06.2024 as below.

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This circular clarifies the conditions under which discounts provided by suppliers via tax credit notes after supply should not be included in the taxable value. It also provides a mechanism for verifying the reversal of Input Tax Credit (ITC) by recipients. The goal is to ensure uniform implementation of Section 15(3)(b)(ii) across tax departments until a permanent system functionality is introduced.

Key Points:

Post-Supply Discounts:

When suppliers provide discounts via tax credit notes after a supply has been made, these discounts may be excluded from the taxable value, but specific conditions must be met.

Conditions for Discount Exclusion:

1. Pre-existing Agreement: The discount must be established in an agreement made at or before the time of supply.
2. Linking to Invoices: The discount should be directly linked to specific invoices to ensure traceability.
3. Reversal of ITC: The recipient must reverse the proportionate ITC related to the discount to ensure that the ITC claimed on the original supply is adjusted in line with the discounted value.
   

Verification and Compliance Mechanism:

Currently, there is no functionality on the GST common portal for suppliers or tax officers to verify the recipient’s ITC reversal. This has caused issues in the field, and the circular proposes a temporary solution:

For Total Tax Exceeding ₹5 Lakhs:

When the combined CGST, SGST, and IGST on discounts in a financial year exceed ₹5,00,000, suppliers must obtain a certificate from the recipient, issued by a Chartered Accountant (CA) or Cost Accountant (CMA). The certificate must certify that the recipient has reversed the required proportionate ITC.

The certificate must include:

• Credit notes and invoice details.
• Amount of ITC reversed for each credit note.
• Document reference confirming the reversal (e.g., FORM GST DRC-03 or return).

For Total Tax Below ₹5 Lakhs:

If the total tax on discounts in a financial year does not exceed ₹5,00,000, suppliers can obtain an undertaking or certificate directly from the recipient, without needing CA/CMA certification. This certificate should also detail the ITC reversal.

These certificates or undertakings will serve as valid evidence of compliance with Section 15(3)(b)(ii) and should be presented during audits or investigations.

Retroactive Application:

This mechanism can also be applied retroactively to past transactions. Suppliers may obtain the required certificates or undertakings as evidence for previous periods if needed by the tax authorities.

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Suggested Sample Certificate Formats:

Certificate Format 1: For Tax Exceeding ₹5 Lakhs

[To be printed on the letterhead of the Chartered Accountant (CA) or Cost Accountant (CMA)]

CERTIFICATE OF INPUT TAX CREDIT REVERSAL

(Under Section 15(3)(b)(ii) of the CGST Act 2017) As per Circular No. 212/6/2024-GST dated 26-06-2024

To:

[Name of the Supplier]

[Address of the Supplier]

[GSTIN of the Supplier]

Subject: Certificate of Reversal of Input Tax Credit (ITC) on Discounts Provided Through Credit Notes for Financial Year [Insert Year]

I/We,…………………………………. [Name of Chartered Accountant/Cost Accountant], a practicing Chartered Accountant/Cost Accountant (Membership No………………………… [Insert Membership No.]), having office at [Insert Office Address], certify that M/s………………………………………. [Name and Address of Recipient] and holder of GSTN NO……………………. (GSTIN: [Insert GSTIN]) has duly reversed the Input Tax Credit (ITC) related to discounts provided through credit notes for Financial Year [Insert Year], amounting to Rs. [Insert Total Amount] (IGST: Rs. […], CGST: Rs. […], SGST: Rs. […]). As details in the enclosed Annexure.

2. I/We confirm that this information is true to the best of my/our knowledge. This certificate is issued in accordance with Circular No. 212/6/2024-GST dated 26th June 2024 to serve as evidence of compliance with Section 15(3)(b)(ii) of the CGST Act 2017.

[Name of Chartered Accountant/Cost Accountant]

Membership No.: [Insert Membership No.]

UDIN No.: [Insert UDIN]

Date: [Insert Date]

ANNEXURE

S. No.	Credit Note No.	Invoice No.	Date of Credit Note	ITC Reversed (₹)	Form/Document of Reversal (GST DRC- 03/Return)
1
2
Total				[Total Amount]

[Name of Chartered Accountant/Cost Accountant]
Membership No.: [Insert Membership No.]
UDIN No.: [Insert UDIN]
Date: [Insert Date]

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Certificate Format 2: For Tax Below ₹5 Lakhs

[To be printed on the letterhead of the recipient]
CERTIFICATE OF INPUT TAX CREDIT REVERSAL
(Under Section 15(3)(b)(ii) of the CGST Act 2017)

As per Circular No. 212/6/2024-GST dated 26-06-2024

To:

[Name of the Supplier]

[Address of the Supplier]

[GSTIN of the Supplier]

Subject: Certificate of Reversal of Input Tax Credit (ITC) on Discounts Provided Through Credit Notes for Financial Year [Insert Year]

I/We, …………………………..[Name of the Recipient], having principal place of business at………………………… [Insert Business Address], with GSTIN………………………… [Insert GSTIN], certify that we have duly reversed the Input Tax Credit (ITC) related to the discounts provided via credit notes for Financial Year [Insert Year], amounting to Rs. [Insert Total Amount] (IGST: Rs. […], CGST: Rs. […], SGST: Rs. […]) as per the details re provided in the enclosed Annexure.

2. I/We confirm that this information is true to the best of my/our knowledge. This certificate is issued in accordance with Circular No. 212/6/2024-GST dated 26th June 2024 to serve as evidence of compliance with Section 15(3)(b)(ii) of the CGST Act 2017.

Signature: [Authorized Person]

Place: [Insert Place]

Date: [Insert Date]

ANNEXURE

S. No.	Credit Note no.	Invoice no.	Date of Credit Note	ITC Reversed (₹)	Form /Document of Reversal (GST DRC-03/ Return)
1
2
Total				[Total Amount]

Signature: [Authorized Person]

Disclaimer:

This certificate format and the accompanying content are provided solely for informational purposes and to assist with compliance under Circular No. 212/6/2024-GST dated 26-06-2024. The use of this format should be done in consultation with a qualified professional, such as a Chartered Accountant (CA) or Cost Accountant (CMA).

This document does not constitute legal or financial advice, and the applicability of the content may vary based on specific circumstances. Users are advised to seek professional advice to ensure full compliance with the Central Goods and Services Tax Act, 2017, and any other relevant legislation.