Section 43 of CGST Act. 2017-Matching, Reversal and Reclaim of Reduction in Output Tax Liability

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(1) Matching of credit note with the corresponding reduction in the claim for input tax credit [Section  43(1)]:

The details of every credit note relating to outward supply furnished by a registered person (i.e. the  supplier) for a tax period shall, in such manner and within such time as may be prescribed, be matched— 

(a) with the corresponding reduction in the claim for input tax credit by the corresponding registered person  (i.e. 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) Matched claim of reduction of output tax liability with reduction in the claim of ITC to be accepted  [Section 43(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 such  manner as may be prescribed, to the supplier. 

(3) Discrepancy in matching of the claim to be communicated [Section 43(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 such manner as may be prescribed. 

The amount in respect of which any discrepancy is communicated under section 43(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 such manner as may be prescribed, in his return for the month  succeeding the month in which the discrepancy is communicated. [Section 43(5)]

The supplier shall be eligible to reduce, from his output tax liability, the amount added under section 43(5) if  the recipient declares the details of the credit note in his valid return within the time specified in section 39(9).  [Section 43(7)] 

(4) Communication of duplication of claims for reduction in output tax liability [Section 43(4)]:

The  duplication of claims for reduction in output tax liability shall be communicated to the supplier in such manner as  may be prescribed. 

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. [Section 43(6)] 

(5) Interest if there is any addition in the output tax liability under section 43(5) or (6) [Section 43(8)]:

A  supplier in whose output tax liability any amount has been added under section 43(5) or section 43(6), shall be  liable to pay interest at the rate specified under section 50(1) (i.e. 18% p.a.) 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. 

(6) Refund of interest if reduction in output tax liability is accepted under section 43(7) [Section 43(9)]: 

Where any reduction in output tax liability is accepted under section 43(7), the interest paid under section 43(8)  shall be refunded to the supplier by crediting the amount in the corresponding head of his electronic cash ledger in  such 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. 

(7) Reduction of output tax liability in contravention of the provisions of section 43(7) [Section 43(10)]: 

The amount reduced from output tax liability in contravention of the provisions of section 43(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 section 50(3) (i.e. 24% p.a.).

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