Section-38. Matching, reversal and reclaim of reduction in output tax liability
(1) The details of every credit note
relating to outward supply furnished by a
registered taxable person
(hereinafter referred to in this section as the ‘supplier’)
for a tax period shall, in the manner
and within the time prescribed, be matched-
(a) with the corresponding reduction
in the claim for input tax credit by the
corresponding taxable person
(hereinafter referred to in this section as the
‘recipient’) in his valid return for
the same tax period or any subsequent tax
period, and
(b) for duplication of claims for
reduction in output tax liability.
(2) The claim for reduction in output
tax liability by the supplier that matches with
the corresponding reduction in the
claim for input tax credit by the recipient shall
be finally accepted and communicated,
in the manner as may be prescribed, to
the supplier.
(3) Where the reduction of output tax
liability in respect of outward supplies exceeds
the corresponding reduction in the
claim for input tax credit or the corresponding
credit note is not declared by the
recipient in his valid returns, the discrepancy
shall be communicated to both such
persons in the manner as may be
prescribed.
(4) The duplication of claims for
reduction in output tax liability shall be
communicated to the supplier in the
manner as may be prescribed.
(5) The amount in respect of which any
discrepancy is communicated under subsection (3) and which is not rectified by the
recipient in his valid return for the month in which discrepancy is
communicated shall be added to the output tax liability of the supplier, in the
manner as may be prescribed, in his return for the month succeeding the month in which
the discrepancy is communicated.
(6) The amount in respect of any
reduction in output tax liability that is found to be
on account of duplication of claims
shall be added to the output tax liability of the
supplier in his return for the month
in which such duplication is communicated.
(7) The supplier shall be eligible to
reduce, from his output tax liability, the amount
added under sub-section (5) if the
recipient declares the details of the credit note
in his valid return within the time
specified in sub-section (9) of section 34.
(8) A supplier in whose output tax
liability any amount has been added under subsection (5) or, as the case may be, under
sub-section (6), shall be liable to pay interest at the rate specified under
sub-section (1) of section 45 in respect of the amount so added from the date of such
claim for reduction in the output tax liability till the corresponding
additions are made under the said sub-sections.
(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 supplier by crediting
the amount in the corresponding head
of his electronic cash ledger in the 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
recipient.
(10) The amount reduced from output
tax liability in contravention of the
provision of sub-section (7) shall be
added to the output tax liability of the
supplier in his return for the month
in which such contravention takes place and
such supplier shall be liable to pay
interest on the amount so added at the rate
specified in sub-section (3) of section 45 .
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