Is It Possible to Declare Credit Note in GST Returns After November 30th?

Can we declare GST credit note in returns even after 30^th November of the subsequent financial year? The author has tried to analyse and deep dive this aspect in the below article.

Introduction

Credit note is a very common financial document which is issued by almost all kinds of businesses. In simple terms, credit note is a document which is issued by the supplier where the supplier wishes to credit the account of the customer for various reason such as price difference, discount, damages, etc. Similarly, even under the GST law, there is a concept of issuance of GST credit note in the following cases:

• taxable value is found to exceed actual taxable value which was supposed to be charged.
• tax charged in that tax invoice exceeds the actual tax payable in respect of such supply.
• where the goods supplied are returned by the recipient.
• where goods or services supplied are found to be deficient.

In this article, the author is not discussing on the technicality of issuance of GST credit note but the time limit within which it should be disclosed in the GST returns.

Legal Provision for issuing and declaring GST credit note:

Section 34(2) provides as follows:

(2) Any registered person who issues a credit note in relation to a supply of goods or services or both shall declare the details of such credit note in the return for the month during which such credit note has been issued but not later than the thirtieth day of November following the end of the financial year in which such supply was made, or the date of furnishing of the relevant annual return, whichever is earlier, and the tax liability shall be adjusted in such manner as may be prescribed:

In summary, the last date for disclosure of credit note in the return is 30^th November following the end of the financial year to which such supply was made or date of filing of annual return, whichever is earlier. Consequently, it implies that the issuance of credit note should also happen before such date.

Analysis of Section 34 of the CGST Act

We now analyse the above provision to understand the timelines. The above provision i.e., Section 34 provides for the time limit for declaration of GST credit note in the return. We first understand the meaning of return under GST because time limit applies only for declaration in return.

What is a return? Section 2(97) of the CGST Act, 2017 defines return to mean any return prescribed or otherwise required to be furnished by or under this Act or the rules made thereunder.

On a monthly basis, all regular taxpayers file GSTR-1 and GSTR-3B. Whether these are returns for the purpose of section 34? Section 37 and Section 39 of the CGST Act read along with rules covers the requirement of furnishing of GSTR-1 and GSTR-3B respectively. We now examine whether GSTR-3B and GSTR-1 are returns.

Whether GSTR-3B is a return?

On reading of section 39, the provision clearly mentions that the form furnished under this provision is a return and consequently, GSTR-3B is clearly covered within the definition of a return under GST post 10.11.2020. The dispute of whether GSTR-3B is a return for the period from 01.07.2017 to 09.11.2020 still exist however, this is not the topic for discussion in this article.

Whether the time limit for declaration of GST credit note applies for declaration in GSTR-3B?

Based on the above, since GSTR-3B is a return, the credit note should be disclosed in GSTR-3B. As provided in Section 34, declaration should not be done later than 30^th November of the subsequent financial year or date of furnishing of annual return, whichever is earlier.

Whether the last date for disclosure/rectification is November GSTR-3B or 30^th November?

The provision specifically mentions 30^th November and hence disclosure should be made in any return which can be filed upto 30th November. Though there is no specific restriction under the law to file GSTR-3B for a particular month in the same month, the common portal (GST portal) does not allow a taxpayer to file GSTR-3B of a particular month say November in the month of November except in certain exceptional circumstances. Only returns upto October can be filed by 30^th November. Therefore, the last date for issuing would technically be 31^st October and declaring GST credit note in GSTR-3B is 30^th November of the subsequent financial year but in the return for the month of October (assumed that annual return would be filed subsequently).

Whether GSTR-1 is a return and hence covered by the time limit of Section 34?

Section 37 of the CGST Act r/w Rule 59 of the CGST Rules provides for furnishing of details of outward supplies in FORM GSTR-1. However, this provision nowhere prescribes/indicate that the form furnished under Section 37 is a return. Consequently, it could be said that GSTR-1 is merely a statement for declaring the outward supplies.

Whether declaration of credit note in GSTR-3B is sufficient?

Since a view could be taken that GSTR-1 is not a return for the purpose of section 2(97) of the CGS Act though not judicially tested, it could be said that there is no time limit for disclosure of GST credit note in GSTR-1. In the case of B.C. Srinivasa Setty [Appeal (civil) 2335 of 2003], it was held that in the absence of any computation mechanism provided in the provision, it must be regarded as that there was no intention to levy any tax. On applying the same analogy here, since section 34 is the specific provision which covers the time limit for declaration of GST credit note, but does not cover the time limit for disclosure in GSTR-1, hence it could be said that there is no time limit for disclosure of credit note in GSTR-1 and disclosure could be made even after 30^th November of the subsequent financial year. However, this view may have to be litigated in the absence of any judgement as on date.

However, there could also be another thought process. If the specific provision i.e., Section 34 does not provide any time limit, the general provision i.e., Section 37 could be referred. Section 37 covers declaration of transactions in GSTR-1.

Section 37 provides that no rectification or omission should be made in GSTR-1 post 30^th November of the subsequent financial year to which such details pertain to. Sub-rule 4(c) of Rule 59 requires disclosure of debit and credit notes in GSTR-1. On harmonious reading of Rule 59, Section 37 and 34, it could be said that any credit note issued in accordance with section 34 should also be declared in GSTR-1 within 30^th November of the next subsequent year in which such supply was made.

Therefore, though it could be said that time limit is not provided in section 34 for disclosure of credit note in GSTR-1, the time limit as provided in proviso to Section 37(3) of the CGST Act could apply to credit note issued under Section 34 of the CGST Act. This may also be accepted by the GST authorities. Similar view is also coming out from circular 26/26/2017-GST dated 29.12.2017 and circular 137/07/2020-GST dated 13.04.2020.

Summary of the above discussion with examples for easy understanding:

Date of invoice	Date of credit note	Last date for disclosure in GSTR-1	Last date for disclosure in GSTR-3B
01.01.2023	01.03.2023	30.11.2023	30.11.2023
01.01.2023	01.07.2023	30.11.2023	30.11.2023
01.01.2024	31.10.2024	30.11.2024	30.11.2024
01.01.2024	30.11.2024	Credit note cannot be issued post 31.10.2024.	Credit note cannot be issued post 31.10.2024.

What if the credit note cannot be adjusted in GSTR-3B upto 30^th November of the next financial year?

In a situation where there is a GST credit note but no outward tax liability, the tax levied in the GST credit note cannot be adjusted in GSTR-3B as the return does not accept negative figures. Though there is no restriction/condition in the GST law which provides that there has to be enough liability to get the benefit of GST charged in the credit note, practically, the GST portal does not allow adjustment of credit note otherwise. Therefore, in such a situation, the credit note remains unadjusted even after 30^th November of the subsequent financial year. The GST Act and rules does not provide any clarification in such a situation however, there are couple of circulars where in this situation has been discussed and clarification has been provided.

Circular 26/26/2017-GST dated 29.12.2017 had addressed the issue of disclosure where there are credit notes but no outward liability. The relevant extract is as follows:

4. It is clarified that as return in FORM GSTR-3B do not contain provisions for reporting of differential figures for past month(s), the said figures may be reported on net basis along with the values for current month itself in appropriate tables i.e. Table No. 3.1, 3.2, 4 and 5, as the case may be. It may be noted that while making adjustment in the output tax liability or input tax credit, there can be no negative entries in the FORM GSTR-3B. The amount remaining for adjustment, if any, may be adjusted in the return(s) in FORM GSTR3B of subsequent month(s) and, in cases where such adjustment is not feasible, refund may be claimed. Where adjustments have been made in FORM GSTR-3B of multiple months, corresponding adjustments in FORM GSTR-1 should also preferably be made in the corresponding months.

The circular clarifies that where credit note cannot be declared in GSTR-3B because the liability is not sufficient, then adjustment of unutilized amount of credit note, to be adjusted in the subsequent months. If the adjustment is not feasible, then refund may be claimed. Similar adjustment should also be made in the corresponding GSTR-1.

In which scenario would the adjustment be infeasible? Section 39 does not allow any rectification or omission to be done post 30^th November of the subsequent financial year. This is similar to the time line as provided in Section 34 of the CGST Act. Hence, if any credit note is pertaining to FY 2023-24, the amount of tax involved in such credit note should be adjusted in GSTR-3B within 30^th November 2024. However, if there is no enough tax liability till 30^th November 2024, the adjustment become infeasible and hence the refund option as provided in the above circular. Consequently, if credit note cannot be adjusted in GSTR-3B upto 30th November of the subsequent financial year, then adjustment cannot be made and the only option available is to claim refund.

Similarly provided in circular 137/07/2020-GST dated 13.04.2020 as well which clarifies that refund application in such cases could be made under “Excess payment of tax, if any” through FORM GST RFD-01.

Conclusion: The author has tried to bring clarity on the confusion regarding disclosure and issuance of GST credit note. The taxpayers have to ensure that credit notes are issued not later than 31^st October of the subsequent financial year to which such supply related to and should be declared in GSTR-1 and GSTR-3B up to October GSTR-1 and October GSTR-3B of the subsequent financial year. This would ensure that there is no loss to the business alongside no dispute from the GST authorities.

I wish to thank CA Jatin Nagpal for vetting this article and providing his inputs.

In case of any clarifications/doubts, the author may be reached at camayankajain@outlook.com.