GST UPDATE NO 88TH ON SC DECISION IN CASE OF BHARTI AIRTEL LTD

The decision pronounced by the Hon’ble Delhi High Court in the case of Bharti Airtel Ltd. was the talk of the town as it allowed the taxpayer to revise the GSTR-3B for the period July, 2017 to September, 2017 in the respective months by holding that the matching concept by way of GSTR-1, 2, 2A and 3 was not operational which lead to omission of certain ITC by the taxpayer. The above decision was challenged before the Supreme Court by the revenue authorities. The hon’ble Apex Court recently reversed the decision pronounced by the Delhi High Court. The reasoning adopted by the Supreme Court is the subject matter of discussion of the present update.

It was pleaded by the respondent that they were supplier of services as well as recipient of services so they were supposed to file the details of outward and inward supplies for every tax period and also of monthly return under the GST Act. In order to calculate the outward tax liability and the claim of ITC during the period from July till September, 2017, there was no formal or official mechanism to check the authenticity of data so as to claim ITC for the relevant period against the transactions effected by it with its suppliers. However, an inbuilt mechanism was guaranteed by the common electronic portal to be put in place by the Competent Authority under the 2017 Act. It was contended that only after the Form GSTR-2A became operational in September, 2018, the respondent realised that there was sufficient amount in the ITC ledger account during the relevant period and it is only due to non-functionality of GSTR-2A that the respondent had to discharge its outward tax liability by depositing in cash. It was contended by the respondent that Form GSTR-3B is a summary return and does not contain the invoice wise details. The recipient who had no access to the vendor’s returns had no facility to verify the correctness of the ITC taken. Form GSTR-3B is a consolidated return wherein the assessee manually files its total credit, outward tax liability etc. The petitioner cannot take advantage of its own failure of not being able to operationalise Forms GSTR-2 and GSTR-3 right at the inception when the provisions of the Act came into force.

The petitioner, being the government department contended that a registered person is obliged to do self-assessment of its transactions and determine the outward tax liability by maintaining the records regarding transactions between suppliers and recipients based on their agreements, invoices and books of accounts, either manually or electronically. The authorities have not role to play whatsoever in this regard. The efficacy of the common electronic portal or malfunctioning thereof, does not extricate the registered person from the primary obligation of self-assessment of outward tax liability as predicated in section 16 of the 2017 Act. Hence, the registered person is expected to exercise the option of utilising ITC or to pay by cash for discharging his outward tax liability at the time of filing of return on the information gathered from the primary record in his possession. The re-conciliation mechanism provided under section 37 and 38 between the outward supplier, registered person and the subsequent recipient, does not impact the rights and obligations of the registered person regarding self-assessment of outward tax liability and the duty to pay the self-assessed outward tax liability in the manner he wants to discharge by using self-assessed ITC or cash payment.

The hon’ble High Court held that the taxpayer was not required to be fully dependent on the auto generated information in the electronic common platform for discharging its obligation to pay outward tax liability for the relevant period rather the taxpayer was under a legal obligation to maintain books of accounts and records as per the provisions of the Act. It was held that the taxpayer was obliged to do self-assessment of ITC as was being done in pre-GST era. The common portal is only a facilitator to feed or retrieve such information and need not be the primary source for doing self-assessment. It was held that the circular clarifying amendment to be made in subsequent return could be struck down only if the same was in conflict with the express provision in the Act. The express provision in the form of section 39(9) clearly posits that omission or incorrect particulars furnished in the GSTR-3B return can be corrected in the return to be furnished in the month or quarter during which such omission or incorrect particulars are noticed. This very position has been restated in the impugned circular. It is therefore, not contrary to the statutory dispensation specified in section 39(9) of the Act. The High Court, however, erroneously noted that there is no provision in the Act, which restricts such rectification of the return in the period in which the error is noticed. It was also held that payment of outward tax liability by cash is solely at the discretion of the taxpayer inspite of having huge credit balance and there is no provision for swapping of the entries of cash and credit. Payment for discharge of tax liability by cash or by way of availing ITC, is a matter of option, which having been exercised by the taxpayer, cannot be reversed unless the Act and the Rules permit such reversal or swapping of the entries.

Hence, it was held that the rectification can be done only in the return to be furnished in the month or quarter during which such omission or incorrect particulars are noticed and not in the return for the period to which it relates. It was held that Form GSTR-2A is only a facilitator for taking an informed decision while doing such self-assessment. The hon’ble Apex Court held that if the decision of High Court is accepted, it would lead to complete uncertainty and no finality could ever be attached to the self-assessment return filed electronically thereby leading to a situation of collapse of tax administration.

The above decision is pro-revenue and will negatively impact the taxpayers as during the initial stages of implementation in GST, there were lot of inadvertent errors committed by them. The non-operational of the proposed matching concept also contributed for commission of errors but unpreparedness of GST portal will not be considered as ground to permit revision of return by the taxpayer in the same month. As such, the above decision will definitely have adverse repercussions on the taxpayers.

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GST UPDATE NO 88TH ON SC DECISION IN CASE OF BHARTI AIRTEL LTD

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