GST UPDATE ON RECTIFICATION IN GSTR-1 and 3B

As per CGST ACT any registered person who has furnished the details under sub-section (1) for any tax period and which have remained unmatched under section 42 or section 43 can rectify such error or omission upon discovery and shall pay the tax and interest (if any) in case there is a short payment of tax on account of such error or omission, in the return to be furnished for such tax period. Such rectification of error or omission in respect of the details furnished under sub-section (1) is allowed till furnishing of the return under section 39 for the month of September following the end of the financial year to which such details pertain, or furnishing of the relevant annual return, whichever is earlier. In the view of above provision of Act The Hon’ble Calcutta High Court in its recent decision in case of Abdul Mannan Khan v. the GST Council & Ors dismissed the petition of assessee to rectify GTSR -1 after the specified time limit in the law. Here the assesse inadvertently uploaded the sale invoice in name of unregistered person instead of registered person and made an application after one and half year for rectification in GSTR-1 due to restriction of ITC availment by buyer. Court ruled “the statute has provided a period of limitation for seeking rectification and the Court cannot condone the limitation period provided for rectification of GSTR-1 Form as per Section 37 of the under CGST Act and condoning such delay would make the provision otiose and open the floodgates for similar cases”. On the contrary Madras HC has recently allowed the writ petition in case of Pentacle Plant Machineries Pvt. Ltd. v. Office of the GST Council and others. It was allowed on the reasoning that the asseesee can correct the human error in the GSTR -1. Court said that correction should be allowed for the inadvertent human error. Here the asseesee, while filing the GSTR -1 instead of GST number of purchaser in Aandhra Pradesh mentioned the GST number Uttar Pradesh. This writ petition has been allowed by Madras HC on the basis of decision in case of SUN DYE CHEM where the assessee while filing the GSTR-1 have wrongly filed the output tax as IGST instead of CGST, SGST and credit of the buyer was blocked. The error was noticed by buyer only after the last date of correction in GSTR -1 i.e. 31st march 2019. Court ruled that since the aseesee was not able to track mistake as the form GSTR -1A and and GSTR-2 was not operationalized. Therefore credit should not be blocked on the basis of inadvertent human error and the court directed permitting the petitioner to resubmit the annexures to GSTR-3B. The petitioner should not be mulcted with any liability on account of the bonafide, human error and the petitioner must be permitted to correct the same. In line with the above view Delhi HC in case of BHARTI AIRTEL LIMITED VERSUS UNION OF INDIA & ORS where there was short claimed input of assessee was amounted to Rs 923 crore and the main reason of such non detection was non-operationalization of Forms GSTR-2A, GSTR-2, and GSTR-3. The High Court also affirmed that since the validations and verification checks proposed in CGST Act, 2017 could not be practically implemented due to lack of proper IT infrastructure, the petitioner could not be denied the opportunity of correcting its mistake in reflection of input tax credit, particularly when there is no mechanism to claim refund of tax paid by them in cash. Circular prescribing rectification of mistakes in subsequent returns is contrary to the return mechanism contained in section 39 of the CGST Act, 2017. Restriction can be introduced by way of circular only if it is in conformity with the scheme of the Act and provisions contained therein. As the circular is going contrary to the scheme of the Act, the same should not be implemented. High Court allowed the petitioner to rectify GSTR-3B for the period July, 2017 to September, 2017. Based on the above case laws, we can say that authorities should also take lenient view in case of genuine and inadvertent human error by allowing the assesee to rectify the GST returns. Consequently, it will not block ITC of purchaser. If it is not done then it would be harsh on assessee as the purchaser will not pay the GST amount to supplier as credit is not available to him. But the amount has been paid in Government exchequer. Simply non- rectification of mistake for a period will deprive the taxpayer of its legitimate credit though the same has been deposited to Government. Such an approach coupled with technical glitches in portal will be very harsh for poor taxpayers in these difficult period of pandemic.

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GST UPDATE ON RECTIFICATION IN GSTR-1 and 3B

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