GST WEEKLY UPDATE :38/2025-26 (21.12.2025) By CA Vipul Khandhar
– By CA Vipul Khandhar, Ahmedabad
1. GSTN Update on Flexible Credit Note Handling in IMS:
The GST Network (GSTN) has introduced a significant and much-awaited enhancement in the Invoice Management System (IMS) on the GST portal, aimed at resolving long-standing practical difficulties faced by taxpayers in handling credit notes, especially in cases involving ineligible Input Tax Credit (ITC).
Earlier, acceptance of a credit note in IMS automatically resulted in reversal of ITC, irrespective of whether the ITC was already reversed, never availed, or was otherwise ineligible. This rigid system often caused double reversal of ITC, mismatches between books and returns, and avoidable reconciliation disputes.
To address this issue, GSTN has now introduced a flexible option while accepting credit notes, allowing taxpayers to determine whether ITC reduction is actually required.
Key Change Introduced by GSTN
While accepting a credit note in IMS, taxpayers will now be prompted to select:
- “Yes” – ITC to be reduced (default option), or
- “No” – ITC not to be reduced
How It Works
- Yes → ITC will be reduced in the electronic credit ledger
- No → ITC will remain unchanged
This flexibility ensures that ITC is adjusted only where required, reflecting the true tax position.
Practical Importance of the Update
This enhancement is particularly beneficial in the following scenarios:
- ITC was already reversed in earlier returns
- ITC was never availed due to ineligibility (e.g., blocked credit under Section 17(5))
- Credit note pertains to post-supply price revisions where tax impact was already neutralised
- Accounting corrections without GST credit implication
Earlier, taxpayers had no choice but to accept credit notes with automatic ITC reversal, leading to double disallowance and subsequent litigation or rectification efforts.
Important Clarification on Bulk Acceptance
GSTN has clarified that:
- Where multiple credit notes are accepted together using the checkbox option, the selected response (Yes/No) will apply uniformly to all selected records
- If different treatment is required for different credit notes, they must be processed individually
This calls for careful review before bulk acceptance.
Illustration
Scenario:
- A taxpayer received a credit note of ₹1,00,000 + GST ₹18,000
- The ITC of ₹18,000 had already been reversed earlier during audit reconciliation
Earlier System:
- Acceptance of credit note → automatic ITC reduction
- Result: Double reversal of ₹18,000
Under the New IMS Functionality:
- Taxpayer selects “No – ITC not to be reduced”
- ITC remains unchanged
- Correct tax position maintained
FAQs – Client Advisory
Q1. Is this option mandatory to select?
Yes. While accepting a credit note in IMS, the system now requires the taxpayer to confirm whether ITC reduction is required.
Q2. What happens if no selection is made?
The system defaults to “Yes – ITC to be reduced”. Hence, caution is advised.
Q3. Can this option be changed after acceptance?
As per current functionality, once accepted, changes may not be easily reversible. Proper review before submission is critical.
Q4. Does this apply to all credit notes?
Yes, the option applies to credit notes reflected in IMS, including cases of ineligible ITC.
Q5. Is this applicable retrospectively?
The update applies to credit notes processed after implementation. Past reversals will need manual reconciliation or rectification, if permissible.
- Consolidated FAQ GSTR-9 & 9C:
| Q. No. | Issue / Query | Short Answer / Key Point |
| 1 | When GSTR-9/9C enabled? | After filing all GSTR-1 & GSTR-3B of FY 24-25 |
| 2 | If any return pending? | GSTR-9 not enabled |
| 3 | What is Table 8A? | ITC as per GSTR-2B of FY 24-25 (incl. Apr–Oct next FY) |
| 4 | Impact of IMS on GSTR-9? | No direct impact; data flows via GSTR-2B |
| 5 | GSTR-1A effect on GSTR-9? | Yes, auto-population in Table 4 & 5 |
| 6 | What is Table 6A1? | ITC of FY 23-24 claimed in FY 24-25 (except Rule 37/37A) |
| 7 | ITC claimed, reversed & reclaimed same FY | Claim → 6B, Reversal → Table 7, Reclaim → 6H |
| 8 | FY 23-24 ITC reclaimed in FY 24-25 | Non-37/37A → 6A1; Rule 37/37A → 6H |
| 9 | FY 24-25 ITC reclaimed in FY 25-26 | Depends on reason; reported in next year tables |
| 10 | Change in Table 6M? | No change; only label aligned |
| 11 | What is Table 8A Excel? | Invoice-wise details downloadable from portal |
| 12 | Difference between 8A Excel & UI? | Yes, in specific amendment/RCM/PoS cases |
| 13 | Supplier amendments impact? | Yes, amended data auto-populated |
| 14 | Invoices of FY 24-25 added next FY | Included in 8A after recipient files 3B |
| 15 | What is Table 8C? | Missed ITC of FY 24-25 claimed in next FY |
| 16 | ITC reclaimed next FY after reversal | Not to be reported in 8C |
| 17 | When 8C applicable? | Missed ITC or late-reported supplier invoices |
| 18 | Delinking 6H from 8B effect | Reduces mismatch in Table 8D |
| 19 | Import ITC claimed next FY | Report in 8H1 & Table 13 |
| 20 | Tax payable in Table 9 | Net liability from GSTR-3B |
| 21 | Change in Table 12 & 13 labels | No reporting impact |
| 22 | HSN reporting help | Excel download provided |
| 23 | 65% concessional rate | Removed from GSTR-9 |
| 24 | Late fee in GSTR-9C | As per Sec 47(2); auto-calculated |
| 25 | Rule 37/37A reclaimed ITC | Treated as ITC of reclaim year |
| 26 | RCM paid in next FY | Report in GSTR-9 of payment year |
| 27 | FY 23-24 ITC reversed in FY 24-25 | No reporting in Table 7 |
| 28 | Table 12B vs 7J mismatch | Explain difference in 9C Table 13 |
| 29 | Table 7J ≠ GSTR-3B 4C | Due to prior-year ITC |
| 30 | FY 23-24 ITC reversed in FY 24-25 | Not reported in GSTR-9 |
| 31 | Goods received next FY | Accounting-based; explain in 9C |
| 32 | Non-GST purchases | Not required to report |
| 33 | Table 4G1 applicable to whom | Only e-commerce operators u/s 9(5) |
- AAR & Important Judgements:
(i) Calcutta Highcourt Decision Regarding IGST ITC claimed in GSTR-9 – Failure to claim in GSTR-3B – Appellate Authority bound to pass reasoned order – Mechanical rejection without examining offset against CGST/SGST demand unsustainable – Matter remanded for fresh adjudication:
(Applicant – Laxmi Ghosh)
Where the taxpayer inadvertently failed to claim eligible IGST Input Tax Credit in monthly returns in Form GSTR-3B but subsequently disclosed and claimed such ITC in the annual return in Form GSTR-9, the Appellate Authority cannot reject the claim merely by stating that the plea is “devoid of logic, facts and proper explanation” without assigning cogent reasons or specifying deficiencies in documents. Failure to examine whether IGST ITC disclosed in GSTR-9 could be adjusted against CGST/SGST demand renders the appellate order arbitrary and violative of principles of natural justice. The appellate order was set aside and the matter remanded for fresh consideration with directions to pass a reasoned order.
Disclaimer:
This publication contains information for general guidance only. It is not intended to address the circumstances of any particular individual or entity. Although the best of endeavour has been made to provide the provisions in a simpler and accurate form, there is no substitute to detailed research with regard to the specific situation of a particular individual or entity. We do not accept any responsibility for loss incurred by any person for acting or refraining to act as a result of any matter in this publication.
(The Author is a well known Chartered Accountant practicing on Direct & Indirect Taxes)
