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March 13, 2021

Assessee can rectify or revise Form GSTR-3B or GSTR-1 – HC

by CA Jessica Nagaonkar in GST

Assessee can rectify or revise Form GSTR-3B or GSTR-1 – HC

GST return is a format where a taxpayer registered under the Goods and Services Tax (GST) law has to file for each registration separately. Also, the number of GST returns to be filed will be based on the type of taxpayer, such as regular taxpayer, composition dealer, e-commerce operator, TDS deductor, non-resident taxpayer, Input Service Distributor (ISD) etc. Usually, a regular taxpayer has to file two returns per month (GSTR-1, GSTR-3B) and an annual return (GSTR-9/9C) for each GST registration separately. The Scheme of filing of returns as envisaged by the CGST Act is explained herein below:

  • Section 37(1) of the CGST Act provides that a registered person is required to file a return (Form GSTR1) containing details of his outward supply for the tax period i.e., a month.
  • These details of outward supplies of a registered person are communicated to the recipients in an auto-populated return (Form GSTR-2A) under Section 37(1) read with Section 38(1) of the CGST Act.
  • Section 38(1) of the CGST Act provides that a registered person shall verify, validate, modify or delete such details of inward supplies communicated under Section 37(1) of the CGST Act in the Form GSTR-2A.
  • Thereafter, under Section 38(2) of the CGST Act the recipient files a return (Form GSTR-2) containing details of his inward supplies based on Form GSTR 2A.
  • These details are then communicated to the suppliers under Section 38(3) of the CGST Act and suppliers can accept or reject the details under section 37(2) and Form GSTR1, shall stand amended accordingly.
  • The details of inward supplies provided in Form GSTR-2 are auto-populated in the ITC ledger of the recipient of such supplies on submissions of this form.
  • Section 38(5) of the CGST Act and 39(9) of the CGST Act provides that details that have remained unmatched shall be rectified in the return to be furnished for the month during which such omission or incorrect particulars are noticed.
  • Section 39 of the CGST Act provides that every registered person shall furnish a return (From GSTR-3) of inward and outward supplies, ITC, tax payable, tax paid and such other particulars as may be prescribed.

Let us refer to the case of M/s Deepak Print v. Union of India, where the issue under consideration was whether assessee can rectify of revise Form GSTR 3B or GSTR 1 or not.

Facts of the Case:

  • The writ applicant was a proprietary concern and was engaged in the business of printing of dress materials etc and was registered under GST.
  • It appeared that the writ applicant had submitted the return of his business in the month of May, 2019 through the Online process, i.e., the GST Online Portal.
  • The writ applicant, inadvertently, in the course of making entries in the GSTR-3B for the month of May, 2019, wrongly uploaded the entries of M/s. Deepak Process instead of M/s. Deepak Print
  • In such circumstances, referred to above, the writ applicant preferred a representation in writing addressed to the Nodal Officer, SGST Office
  • The Nodal Officer at Rajkot did not even bother to give a formal reply or respond to the representation preferred by the writ applicant, referred to above.
  • The writ applicant did try his best to take up the matter with the concerned authority, but ultimately came before the High Court (HC) with the present writ application.

Observations of HC on the issue of the present case

  • HC took notice of the fact that in last two years, the respondents had not even deemed it fit to file a formal reply opposing the writ application.
  • Even, as on date, time was prayed for, which HC declined having regard to the facts of the present case.
  • The short point for HC’s consideration was whether the writ applicant was entitled to seek rectification of Form GSTR-3B for the month of May, 2019.

Reference to older case by HC

  • HC referred to the case Bharti Airtel Limited vs. Union of India & Ors., Writ Petition (Civil) decided on 05.05.2020.
  • In that case, the grievance of the Petitioner pertained to the rectification of Form GSTR- 3B for the period from July to September, 2017.
  • This was the tax period/month in which the error had crept in.

In Bharti Airtel Limited HC delved into the concepts of filing of returns and the statutory provisions governing the same

  • On a plain reading of the provisions, it clearly emerged that the statutory scheme, as envisaged under the Act provided a facility for validation of monthly data through the IT System of the Government wherein the output of one dealer (Form GSTR-1), became the input of another dealer and got auto-populated in Form GSTR2 (Inward Supplies).
  • These details had to be electronically populated in Form GSTR-3 (Monthly Return) and tax had to be paid based on this return.
  • The CGST Act and the CGST Rules as envisaged provided for verification, validation, modification and deletion of information for each period by interaction, over the IT System, between the supplier and the recipient so as to reflect the correct details pertaining to the tax period in that particular tax period itself (i.e., a month).
  • In short, the CGST Act contemplated a self-policing system under which the authenticity of the information submitted in the returns by registered person was not only auto-populated but was verified by the supplier and confirmed by the recipient in the same month.
  • The statutory provisions, therefore, provided not just for a procedure but a right and a facility to a registered person by which it could be ensured that the ITC availed and returns could be corrected in the very month to which they related, and the registered person was not visited with any adverse consequences for uploading incorrect data.

Observations of the HC in Bharti Airtel Limited on the provisions of the rectification scheme under GST

The statute provides for a 2-stage rectification procedure by which the errors or omissions could be rectified by a registered person.

  • The 1st stage of rectification can happen under Section 37(1) read with Sections 38 (1), 38 (3) and 37 (2) of the CGST Act wherein a registered person could rectify the errors or omissions pertaining to a tax period in the return to be furnished for such tax period itself through a self-policing and auto-populated interaction on the system
  • The 2nd stage of rectification is provided under Section 38 (5) and 39 (9) of the CGST Act wherein, in respect of only unmatched details – which could not be corrected at the first stage, rectification could be done in the return to be furnished for the month during which such omission or incorrect particulars were noticed.

Observations of the HC on the fact that Forms GSTR-2 and 3 could not be operationalized by the Government

  • While the GST regime envisaged the filing process and recording of ITC and payment of taxes, admittedly, due to system issues and under preparedness with regard to the extent of data to be processed, Form GSTR-2, and 3 were not made operational
  • Since Forms GSTR-2 and 3 could not be operationalized by the Government, the Government introduced Rule 61(5) (which was amended vide Notification No. 17/2017-Central Tax, dated 27.07.2017) and the Rule 61(6) in the CGST Rules, and provided for filing of monthly return in Form GSTR-3B which was only a summary return.
  • Form GSTR- 3B is filled in manually by each registered person and has no inbuilt checks and balances by which it could be ensured that the data uploaded by each registered person was accurate, verified and validated.
  • Therefore, the design and scheme of the Act as envisioned was not entirely put into operation as yet.
  • In these circumstances HC found merit that if the statutorily prescribed form i.e., GSTR-2 & 3 had been operationalized by the Government, the Petitioner with reasonable certainty would have known the correct ITC available to it in the relevant period, and could have discharged its liability through ITC, instead of cash.
  • Since Form GSTR-2 & 2A were not operationalized – and because the systems of various suppliers were not fully geared up to deal with the change in the compliance mechanism, the Petitioner perhaps did not have the exact details of the ITC available for the initial 3 months i.e., the relevant period.
  • In this situation, since Petitioner’s ITC claim was based on estimation and the exact amount for the relevant period was not known, Petitioner discharged the GST liability for the relevant period in cash, although, in reality, ITC was available with it (though it was not reflected in the system on account of lack of data).
  • Indisputably, if the statutorily prescribed returns i.e., GSTR 2 and GSTR 3 had been operationalized by the Government, the Petitioner would have known the correct ITC amount available to it in the relevant period, and could have discharged its liability through ITC.
  • As a consequence, the deficiency in reporting the eligible ITC in the months of July – September 2017 in the form GSTR3B had resulted in excess payment of cash by the Petitioner

Conclusion by HC in the case of Bharti Airtel Limited

  • HC held that the rectification of the return for that very month to which it related was imperative and, accordingly, HC read down para 4 of the impugned Circular No. 26/26/2017-GST dated 29.12.2017 to the extent that it restricted the rectification of Form GSTR-3B in respect of the period in which the error had occurred.
  • Accordingly, HC allowed the present petition and permitted the Petitioner to rectify Form GSTR-3B for the period to which the error related.
  • HC also directed the Respondents that on filing of the rectified Form GSTR-3B, they shall, within a period of two weeks, verify the claim made therein and give effect to the same once verified.
  • In view of the fact that the final relief sought by the Petitioner was granted and the petition was allowed, no separate order was required to be passed in the application seeking interim relief. Accordingly, the said application was disposed

Conclusion by HC in the present case

  • Thus, in view of the judgment in Bharti Airtel Limited, HC held that the writ applicant should be permitted to rectify the Form GSTR-3B in respect of the relevant period.
  • The relief, as prayed for in Para-9(C) was also granted and the respondents should act accordingly.
  • In such circumstances, HC directed the respondent that on filing of the rectified Form GSTR-3B, it shall, within 2 weeks, verify the claim made therein and give effect to the same once verified.
  • As the writ applicant was dragged into unnecessary litigation only on account of the technicalities raised by the respondents, the writ applicant would not be saddled with the liability of payment of late fees.
  • With the aforesaid directions, this writ application was disposed of.

In simple words, assessee can rectify of revise Form GSTR 3B or GSTR 1

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