Delhi High Court Issues Notice on CA Certification for Credit Reversal in Post-Sales DiscountM/s. JSW Steel Limited v. DGGI and Ors. [W.P. (C) No. 13769/2024]

The Delhi High Court has issued a notice in response to a writ petition filed by M/s. JSW Steel Limited, challenging Circular No. 212/6/2024-GST dated June 26, 2024. The Circular mandates that suppliers collect a Chartered Accountant (CA) or Chartered Management Accountant (CMA) certificate from the recipient to ensure credit reversal related to post-sales discounts.

Key Facts:

M/s. JSW Steel Limited challenged the Circular issued by the Central Board of Indirect Taxes and Customs, which requires suppliers to provide a CA/CMA certificate for every credit note and related supply transaction. The company also contested a show cause notice (SCN) issued on August 02, 2024.

Legal Issue:

Is the requirement for CA/CMA certification to prove credit reversal for post-sales discounts valid?

Court Ruling:

The Delhi High Court accepted the petition, stating that the issue warrants further consideration. The court directed the Revenue Department to provide a ruling on the matter, particularly concerning Section 15(3)(b) of the CGST Act.

Our Comments:

Circular No. 212/6/2024-GST addresses the verification of input tax credit (ITC) reversals for post-sales discounts. Since there is currently no mechanism to verify ITC reversals via the common GST portal, the Circular mandates that suppliers obtain a CA/CMA certificate. This certificate should confirm that the recipient has reversed the proportionate ITC, including relevant details such as credit notes, invoice numbers, and the corresponding ITC reversal. For transactions under ₹5,00,000, an undertaking or certificate from the recipient is acceptable in place of the CA/CMA certificate.

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