Section 42 – Matching, Reversal and Re-claim of ITC
Section 42 of CGST Act, 2017 – Matching, Reversal and Re-claim of Input Tax Credit
Updated on: February 2026 (as applicable till date)
Prepared by: Yours Tax Consultant
1. Introduction to Section 42
Section 42 was originally introduced to provide a system-driven mechanism for matching Input Tax Credit (ITC) claimed by recipients with tax paid by suppliers.
However, due to practical difficulties, the matching mechanism envisaged under Sections 42 and 43 has not been implemented.
2. Legislative Intent of Section 42
The intent behind Section 42 was to:
- Ensure one-to-one matching of ITC
- Prevent wrongful availment of credit
- Create an automated compliance ecosystem
This was to be achieved through system-based comparison of supplier and recipient returns.
3. Statutory Framework (Original Scheme)
As per the original provisions:
- ITC claimed by recipient would be matched
- Mismatch would be communicated to both parties
- Unresolved mismatch would lead to reversal
- Reclaim allowed once discrepancy is corrected
This mechanism was to work through returns filed under Section 39.
4. Current Legal Status of Section 42
Although Section 42 continues to exist in the CGST Act,
- Its operational provisions are not notified
- Return matching mechanism is not implemented
- No rule-based procedure is currently functional
In practice, Section 42 is kept in abeyance.
5. Impact of Omission of GSTR-2 & GSTR-3
Section 42 was designed to operate with:
- GSTR-1 (Supplier)
- GSTR-2 (Recipient)
- GSTR-3 (Monthly return)
Since GSTR-2 and GSTR-3 were suspended, the matching system under Section 42 became impractical.
6. Present ITC Control Mechanism
Currently, ITC control is ensured through:
- Section 16 – Eligibility conditions
- Section 41 – Self-assessed ITC with reversal
- GSTR-2B based restrictions
- Rule 36(4) compliance
Thus, Section 42 has been effectively replaced in practice.
7. Whether Section 42 is Applicable Today?
As on date:
- No notices are issued under Section 42
- No matching or reversal is done under this section
- No reclaim process is followed under this section
However, it remains part of the Act and may be revived, amended or omitted in future.
8. Judicial & Departmental Approach
Courts and tax authorities:
- Do not rely on Section 42 for ITC reversal
- Rely on Section 16, 41 and Rule 36 instead
This reflects the practical non-operation of Section 42.
9. Related Provisions
- Section 41 – Claim of ITC and reversal
- Section 16 – Eligibility and conditions for ITC
- Rule 36 – Documentary requirements
10. Practical Note for Taxpayers
Although Section 42 is still part of the CGST Act, ITC compliance today is governed by Sections 16 and 41 read with Rules and GSTR-2B. Taxpayers should not rely on Section 42 for credit protection.
11. Professional Insight
Section 42 is a classic example of “law on paper but not in practice”. A good GST professional must know not only what the Act says, but also what is actually enforced.
Disclaimer: This article is prepared based on the CGST Act, CGST Rules, notifications and prevailing legal position as applicable till date. Future legislative changes may revive, amend or omit this provision.
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