Section 42 - Matching, reversal and reclaim of input tax credit of CGST ACT, 2017

              42. (1) The details of every inward supply furnished by a registered person (hereafter
in this section referred to as the “recipient”) for a tax period shall, in such manner and within
such time as may be prescribed, be matched––
                        (a) with the corresponding details of outward supply furnished by the
corresponding registered person (hereafter in this section referred to as the “supplier”)
in his valid return for the same tax period or any preceding tax period;
                       (b) with the integrated goods and services tax paid under section 3 of the Customs
Tariff Act, 1975 in respect of goods imported by him; and
                       (c) for duplication of claims of input tax credit.
                 (2) The claim of input tax credit in respect of invoices or debit notes relating to inward
supply that match with the details of corresponding outward supply or with the integrated
goods and services tax paid under section 3 of the Customs Tariff Act, 1975 in respect of
goods imported by him shall be finally accepted and such acceptance shall be communicated,
in such manner as may be prescribed, to the recipient.
                 (3) Where the input tax credit claimed by a recipient in respect of an inward supply is
in excess of the tax declared by the supplier for the same supply or the outward supply is not
declared by the supplier in his valid returns, the discrepancy shall be communicated to both
such persons in such manner as may be prescribed.
                (4) The duplication of claims of input tax credit shall be communicated to the recipient
in such manner as may be prescribed.
                (5) The amount in respect of which any discrepancy is communicated under
sub-section (3) and which is not rectified by the supplier in his valid return for the month in
which discrepancy is communicated shall be added to the output tax liability of the recipient,
in such manner as may be prescribed, in his return for the month succeeding the month in
which the discrepancy is communicated.
                (6) The amount claimed as input tax credit that is found to be in excess on account of
duplication of claims shall be added to the output tax liability of the recipient in his return for
the month in which the duplication is communicated.
               (7) The recipient shall be eligible to reduce, from his output tax liability, the amount
added under sub-section (5), if the supplier declares the details of the invoice or debit note
in his valid return within the time specified in sub-section (9) of section 39.
              (8) A recipient in whose output tax liability any amount has been added under
sub-section (5) or sub-section (6), shall be liable to pay interest at the rate specified under
sub-section (1) of section 50 on the amount so added from the date of availing of credit till
the corresponding additions are made under the said sub-sections.
              (9) Where any reduction in output tax liability is accepted under sub-section (7), the
interest paid under sub-section (8) shall be refunded to the recipient 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 supplier.
            (10) The amount reduced from the output tax liability in contravention of the
provisions of sub-section (7) shall be added to the output tax liability of the recipient in his
return for the month in which such contravention takes place and such recipient shall be
liable to pay interest on the amount so added at the rate specified in sub-section (3) of
section 50.

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