Section 42 provides for procedure of matching of clam of ITC by the recipient with the corresponding outward supplies by supplier.

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Section 42(1)

The details of inward supply furnished by recipient

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 supplier in his valid return for the same tax period or any preceding tax period;

(b) with the IGST paid u/s 3 of the Customs Tariff Act, 1975 in respect of goods imported by him; and

(c) for duplication of claims of input tax credit.

Rule 69

The following details of ITC claimed on inward supplies including imports, provisionally allowed u/s 41, shall be matched u/s 42 after the due date of GSTR-3-

(a) GSTIN of the supplier;

(b) GSTIN of the recipient;

(c) invoice or debit note number;

(d) invoice or debit note date; and

(e) tax amount:

Provided that where the time limit for furnishing GSTR-1 specified u/s 37 and GSTR-2 specified u/s 38 has been extended,

the date of matching relating to claim of ITC shall also be extended accordingly:

Provided further that the Commissioner may, by order, extend the date of matching relating to claim of input tax credit to such date as may be specified therein.

Section 42(2) read with rule 70(1)

The claim of ITC in respect of invoices/DN relating to inward supply that match with the details of corresponding outward supply or with the IGST paid u/s of the Customs Tariff Act, 1975 in respect of goods imported by him

shall be finally accepted and

such acceptance shall be communicated, electronically to the RP making such claim in GST MIS-1 through the common portal.

Rule 70(2)

The claim of ITC in respect of any tax period which had been communicated as mismatched but is found to be matched after rectification by the supplier or recipient shall be finally accepted and made available electronically to the person making such claim in GST MIS-1 through the common portal.

Section 42(3) read with Rule 71(1)

If ITC claimed by a recipient 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 the

recipient making such claim electronically in GST MIS-1 and

supplier electronically in GST MIS-2

through the common portal on or before the last date of the month in which the matching has been carried out.

Rule 71(2)

A supplier to whom any discrepancy is made available u/sr (1) may make suitable rectifications in the statement of outward supplies to be furnished for the month in which the discrepancy is made available.

Explanation to Rule 71

(i) Rectification by a supplier means adding or correcting the details of an outward supply in his valid return so as to match the details of corresponding inward supply declared by the recipient

Rule 71(3)

A recipient to whom any discrepancy is made available u/sr (1) may make suitable rectifications in the statement of inward supplies to be furnished for the month in which the discrepancy is made available.

Explanation to Rule 71

(ii) Rectification by the recipient means deleting or correcting the details of an inward supply so as to match the details of corresponding outward supply declared by the supplier.

Section 42(5) read with rule 71(4)

 The amount in respect of which any discrepancy is communicated u/ss (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 GSTR-3 for the month succeeding the month in which the discrepancy is communicated.

Section 42(4) read with Rule 72

The duplication of claims of ITC shall be communicated to the recipient in GST MIS-1 electronically through the common portal.

Section 42(6)

The amount claimed as ITC 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.

Section 42(8)

A recipient in whose output tax liability any amount has been added u/ss (5) or (6),

shall be liable to pay interest at the rate specified u/s 50 on the amount so added from the date of availing of credit till the corresponding additions are made.

Section 42(7)

The recipient shall be eligible to reduce, from his output tax liability, the amount added u/ss (5), if the supplier declares the details of the invoice/DN in his valid return within the time specified u/s 39(9)

Section 42(9) read with Rule 77

Where any reduction in output tax liability is accepted u/ss (7),

the interest paid u/ss (8) shall be refunded to the recipient on claim by the RP in his return GSTR-3 and shall be credited to his electronic cash ledger in GST PMT-05 and the amount credited shall be available for payment of any future liability towards interest or the taxable person may claim refund of the amount under section 54.

Provided that the amount of interest to be credited in any case shall not exceed the amount of interest paid by the supplier.

Section 42(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 u/s 50(3)