Section 43 of CGST Act: Matching, Reversal and Reclaim of Reduction in Output Tax Liability
Updated legal status: Section 43 is no longer part of the operative CGST Act from 1 October 2022.
What Section 43 dealt with
Before its omission, Section 43 provided a statutory matching mechanism for a supplier's reduction in output tax liability arising from a credit note. It contemplated matching the supplier's credit-note details with the corresponding reduction of input tax credit by the recipient, identifying discrepancies or duplicate claims, adding unmatched amounts back to output tax liability, and permitting reclaim where the prescribed conditions were later satisfied.
The provision formed part of the original two-way return-matching framework. That framework was subsequently removed from the Act, and Sections 42, 43 and 43A were omitted together.
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Current legal position of Section 43
Section 107 of the Finance Act, 2022 omitted Sections 42, 43 and 43A of the CGST Act. Notification No. 18/2022-Central Tax brought the relevant provisions of the Finance Act, 2022 into force from 1 October 2022. Accordingly, Section 43 should not be presented as a currently operative matching provision after that date.
The present return and input tax credit framework should therefore be read with the current provisions of the CGST Act and Rules, including Section 34 (Credit and Debit Notes), Section 37 (Details of Outward Supplies), Section 38 (Communication of Details of Inward Supplies and Input Tax Credit), Section 39 (Furnishing of Returns) and Section 41 (Availment of Input Tax Credit), as applicable.
Earlier text of Section 43 - historical reference
(1) The details of every credit note relating to outward supply furnished by a registered person (referred to in the section as the "supplier") for a tax period were to be matched, in the prescribed manner and time, with the corresponding reduction in the recipient's claim for input tax credit and for duplication of claims for reduction in output tax liability.
(2) A supplier's claim for reduction in output tax liability that matched the corresponding reduction in the recipient's input tax credit was to be finally accepted and communicated to the supplier in the prescribed manner.
(3) Where the reduction of output tax liability exceeded the corresponding reduction in the recipient's input tax credit, or the corresponding credit note was not declared by the recipient in the valid return, the discrepancy was to be communicated to both persons.
(4) Duplication of claims for reduction in output tax liability was to be communicated to the supplier.
(5) An unrectified discrepancy communicated under sub-section (3) was to be added to the supplier's output tax liability in the return for the succeeding month, in the manner prescribed.
(6) A reduction in output tax liability found to arise from a duplicate claim was to be added to the supplier's output tax liability for the month in which the duplication was communicated.
(7) The supplier could reduce the amount earlier added under sub-section (5) where the recipient subsequently declared the credit-note details within the time then specified under Section 39.
(8) Where an amount was added under sub-section (5) or (6), the supplier was liable for interest under the provision as it then stood.
(9) Where a reduction was later accepted under sub-section (7), the provision contemplated refund of the interest paid, subject to the statutory limitation stated in the proviso.
(10) A reduction in output tax liability made contrary to sub-section (7) was to be added back to the supplier's output tax liability, with interest as provided by the section then in force.
Note: The paragraphs above summarize the former provision for readability. For historical legal research, consult the official text applicable to the relevant tax period.
Related provisions and pages
Section 34 - Credit and Debit Notes is particularly relevant to credit notes and adjustment of tax liability. See also Section 37 - Furnishing Details of Outward Supplies, Section 38 - Communication of Details of Inward Supplies and Input Tax Credit, Section 39 - Furnishing of Returns, Section 41 - Availment of Input Tax Credit, Section 42 - Omitted matching provision, Section 44 - Annual Return and Section 50 - Interest on Delayed Payment of Tax.
Official legal resources
For the latest statutory text and notifications, refer to the official India Code - Central Goods and Services Tax Act, 2017 and the CBIC GST portal. The commencement of the 2022 amendments is recorded in CBIC Central Tax Notifications under Notification No. 18/2022-Central Tax dated 28 September 2022.