What does Section 42 say?

Section 42 of the CGST Act has been omitted and is no longer in force. However, understanding this provision is important because it formed a key part of the original GST framework when the law was introduced. The section was designed to establish a system of matching Input Tax Credit (ITC) claimed by recipients with the details of outward supplies reported by suppliers. The purpose was to ensure that only genuine ITC was availed and that tax credits were supported by actual transactions reported in the GST system.

Under this mechanism, the details of purchases reported by the recipient were to be matched with the sales details reported by the supplier. If the information matched, the recipient would be allowed to retain the ITC claimed. However, if discrepancies were identified, such as non-reporting of invoices by the supplier or differences in invoice values, the recipient could be required to reverse the credit until the mismatch was rectified. Once corrected, the credit could be reclaimed.

The objective of this provision was to prevent fraudulent claims of ITC, reduce tax evasion, and improve transparency within the GST framework. However, due to practical and technological challenges in implementing a comprehensive matching system, the Government eventually omitted Section 42. The GST regime now relies on return-based compliance, auto-generated statements, and conditions prescribed under Sections 16 and 41 for availing ITC.

Although the section is no longer operational, businesses should continue reconciling purchase records with GSTR-2B and supplier filings. Proper reconciliation helps identify discrepancies, avoid ineligible credits, and maintain compliance with current GST requirements.

Simple Example

A business claimed ITC based on a supplier invoice. If the supplier failed to report the same invoice in GST returns, the mismatch could have led to reversal of the ITC under the original Section 42 mechanism.

Key Points

• Section 42 has been omitted.
  • Originally dealt with ITC matching.
  • Aimed to prevent fraudulent ITC claims.
  • Mismatches could result in ITC reversal.
  • Promoted transparency and compliance.
  • Reconciliation remains important even today.

In One Line

Section 42 originally provided for matching and verification of Input Tax Credit but has now been omitted from the CGST Act.