Section 43 – Matching, reversal and reclaim of reduction in output tax liability
Section 43 of CGST Act, 2017 – Matching, Reversal and Reclaim of Reduction in Output Tax Liability Updated on: February 2026 (as applicable till date) Prepared by: Yours Tax Consultant 1. Introduction to Section 43 Section 43 was introduced to provide a system-based mechanism for matching reduction in output tax liability claimed by a supplier, mainly through: Credit notes Downward revision of taxable value or tax This section was intended to work alongside Section 42. 2. Legislative Intent of Section 43 The objective of Section 43 was to: Ensure that reduction in output tax is genuine Prevent misuse of credit notes Link supplier’s reduction with recipient’s ITC reversal Thus, any reduction in tax liability by supplier was to be matched with corresponding action by recipient. 3. Original Matching Mechanism (Conceptual) As per the original design: Supplier declares credit note details System matches it with recipient’s ITC ...