When you issue a credit note that reverses GST to a registered business, your client has to reverse the input tax credit (ITC) they claimed on the original invoice. SmartLedger asks them to confirm this through a one-time acknowledgement link and records their answer on the credit note.
When an acknowledgement is needed
SmartLedger asks for one when both of these are true:
- The client is a registered business with a GSTIN.
- The credit note reverses GST (CGST, SGST or IGST) that was charged to the client.
While you fill in such a credit note, an ITC reversal acknowledgement card on the right explains that the client will be emailed when you issue it. Credit notes to unregistered clients and consumers don't need one.
Before you start
Check that the client has an address in the Email field under Client details on their client record. The request goes to that address. If it's empty, no email is sent until you add one and resend.
Send the request
- Go to Sales → Credit Notes and open the draft credit note.
- Click Issue Credit Note.
- Review the checklist. For a registered client it shows Recipient is B2B (registered) and ITC reversal acknowledgement will be requested.
- Click Confirm and issue.
If you set Status to Issued while creating the credit note, the same checklist opens after you save.
As soon as the credit note is issued, SmartLedger emails the client. The subject reads "ITC reversal acknowledgement for Credit Note #" with the number, after your company name. The email has a Confirm ITC reversal button, and the link is valid for 30 days.
What your client sees
The link opens a page that needs no SmartLedger login. It shows your company name, logo and GSTIN, the credit note number and amount, and the date the link is valid until. It explains that under Section 17(5)/34 of the CGST Act they must reverse the ITC claimed on the original invoice.
Your client clicks I acknowledge ITC reversal. The page then shows Acknowledged with the date it was recorded. If they open the link after it expires, they see Link expired and are asked to contact you for a new one.
Check the result
Open the credit note from Sales → Credit Notes. A banner at the top reads ITC reversal acknowledgement: followed by the status.
- pending — the client hasn't confirmed yet. Click Resend email to send the request again. The link is then valid for another 30 days.
- acknowledged — the client has confirmed. The banner shows when.
The ITC reversal acknowledgement card on the right of the credit note shows the same status as a chip.
How it affects settlement
While the acknowledgement is pending you can still refund the client or apply the credit to another invoice. The credit note stays partially settled until the client acknowledges. It moves to settled once the balance is used up and the acknowledgement is in.
A credit note raised against an invoice the client hasn't paid settles as soon as it's issued, because it only reduces what they owe. Its acknowledgement is still requested and tracked on the credit note.
Tips
- If the client says the email never arrived, check the email on their client record, then click Resend email.
- If the link has expired, Resend email gives it another 30 days.
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