High Court allows Bharti Airtel to Rectify GSTR3B and claim refund of 923 Cr. Will government allow revision for all?
Earlier due to the limitation on the GSTN portal the GSTR3B revision had no scope. Once a GSTR3B is filed there is no provision for revision or amendment of the same. This would mean that the GSTN portal expected that there should not be any human error. But practically that was not possible, nor was it the reality. Mistake or errors do happen and so there should have been a provision to rectify the same. The Delhi High Court in an extremely interesting case has allowed Bharti Airtel to claim a refund of Rs 923 crore on account of overpaying GST between July and September of 2017. This judgement has now seemed to be a ray of hope that there will now be scope for revision and amendment.
It would also interest you to know that after this judgement was passed it was noticed that a new link viz, a “ File Amendment Link” has been recently introduced on the portal which seems to be a relief for the taxpayers. The taxpayers who have accidently filed wrong GSTR3B returns can now amend their returns through this link. This initiative was taken by the government after the Bharti Airtel case came into limelight.
You can now find this link on the GST portal after you login. Go to Service tab- Click on Returns- Click on File Amendment Returns
The link although not activated currently on the portal is definitely a ray of hope that in future there will be scope for rectification and amendment of inadvertently filed GSTR3B returns.
HC gave Bharti airtel chance to revise GSTR3B, Will every taxpayer be allowed to revise GSTR3B now?
Let us understand about the relevance of this case and how the Judgement of Delhi High Court in the case of Bharti Airtel enabled a scope for revision.
Airtel being a registered company is engaged in business of providing telecommunication services in India, including Delhi, by virtue of license granted by the Department of Telecommunication, Government of India. With the implementation of GST, it took registration in each and every State and Union Territory and now has 50 registrations under GST laws for making payment of CGST, SGST and IGST. Since the compliance regime under the GST laws is significantly different and the statutory provisions provide for a complete electronic model of compliances, Airtel remoulded its system from the centralized registration under the erstwhile service tax regime, to multiple registrations under GST in order to bring it in conformity with the new laws.
Facts of the Case
Airtel changed and adopted new GST regime and this included introduction of the technical changes for enabling filing of the statutory Forms GSTR-1, 2 and 3. However, while putting the new law into practice, Government could not operationalise Forms GSTR-2 and 3 and, as a result a summary scheme of filing Form GSTR- 3B was introduced. The petitioner states that this half-baked step of the Government is the root cause in the failure of the system in detecting the errors. The Petitioner recounts that during the initial phase of the GST regime it was facing issues on the electronic system i.e. Goods and Services Tax Network (GSTN) portal created by the Government as the same was not equipped to handle the transition from the erstwhile regime to GST. In this transition phase, several issues cropped up which had a significant impact on tax paid, the output liability, and the ITC of the Petitioner and led to occurrence of several inadvertent errors.
The paramount grievance of the Airtel (hereinafter referred to as Petitioner) is that during the period from July, 2017 to September, 2017 (hereinafter referred to as ‘the relevant period’), the Petitioner in its monthly GSTR- 3B recorded the ITC based on its estimate. As a result, when the Petitioner had to discharge the GST liability for the relevant period, the details of ITC available were not known and the Petitioner was compelled to discharge its tax liability in cash, although, actually ITC was available with it but was not reflected in the system on account of lack of data. The exact ITC available for the relevant period was discovered only later in the month October 2018, when the Government operationalized Form GSTR-2A for the past periods. Thereupon, precise details were computed and Petitioner realized that for the relevant period ITC had been under reported. The Petitioner alleges that there has been excess payment of taxes, by way of cash, to the tune of approximately Rs. 923 crores. This was occasioned to a great degree due to non-operationalization of Forms GSTR-2A, GSTR-2 and GSTR-3 and the system related checks which could have forewarned the petitioner about the mistake. Moreover, since there were no checks on the Form GSTR-3B which was manually filled up by the Petitioner, the excess payment of tax went unnoticed. Petitioner now desires to correct its returns, but is being prevented from doing so, as there is no enabling statutory procedure implemented by the Government.
Relevant Sections Involved
- Section 37(1) of the CGST Act provides that a registered person is required to file a return (Form GSTR- 1) 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.
2. 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 GSTR-1, shall stand amended accordingly. It is important to note that 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.
3. Section 38(5) of the CGST Act and 39(9) of the CGST Act provide 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.
4. 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.
The CGST Act contemplated a self-policing system under which the authenticity of the information submitted in the returns by registered person is not only auto-populated but is 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 can be ensured that the ITC availed and returns can be corrected in the very month to which they relate, and the registered person is not visited with any adverse consequences for uploading incorrect data.
Let us also examine the rectification scheme under the Act. The statute provides for a 2-stage rectification procedure by which the errors or omissions can 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.
While the GST regime envisaged the filing process and recording of ITC and payment of taxes as above, 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; and have been now completely done away with. Form GSTR-2A was made operational only in September 2018 by the Government. This Form is also valid in respect of the past periods commencing July 2017. The Respondents do not dispute that the statutory scheme envisaging the filing of return GSTR-2 and 3 could not be put into operation and has been indefinitely deferred. This makes it abundantly clear that neither the systems of the Government were ready, nor were the systems of the suppliers all across the country geared up to handle such an elaborate electronic filing and reconciliation system introduced for the first time. 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 FormGSTR-3B which is only a summary return.
Further, ITC is taken on the basis of the invoices issued to a registered person providing input/output services. This ITC is credited to the electronic credit ledger [Section 2 (46) of the CGST Act] under section 49(2) of the CGST Act. The output tax liability of the supplier can be paid through utilization of ITC available in the electronic credit ledger, or by utilization of the amount available in the electronic cash ledger [Section 2(43) of the CGST Act] under section 49 (1) of the CGST Act. Section 54 (1) of the CGST Act provides for the refund of the amount of excess paid tax. The said provision read with Circular dated 29.12.2017, deals with the refund of excess tax paid. Under the proviso to section 54 (1) read with Section 49(6), refund of excess input tax credit is allowable only in two situations – where there is zero (0) rated tax, or inverted duty structure. Further, refund of cash is allowed in case of excess balance in electronic cash ledger in accordance with Section 46 (6) of CGST Act. Refund can also be claimed if tax is paid on supply which is not provided, either wholly or partially, and for which invoice has not been issued. Furthermore, refund can be given under Section 77 of the Act which deals with tax wrongfully collected and paid to Central Government or State Government.
In terms of para 4 of Circular No. 26/26/2017-GST, adjustment of tax liability of input tax credit is permissible in subsequent months.
Observation and Findings
That Form GSTR- 3B is filled in manually by each registered person and has no inbuilt checks and balances by which it can be ensured that the data uploaded by each registered person is accurate, verified and validated. Therefore, the design and scheme of the Act as envisioned has not been entirely put into operation as yet. That if the statutorily prescribed form i.e. GSTR-2 & 3 had been operationalized by the Government – as was envisaged under the scheme of the Act, 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. that 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 input tax credit available for the initial three 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 GSTR- 3B has resulted in excess payment of cash by the Petitioner.
It was observed that the output tax liability has substantially reduced on account of low tariff in the telecom sector. As a result, the input tax credit which has accumulated on account of erroneous reporting, cannot be fully utilized as per manner provided in circular 26/2017. Refund provisions as mentioned above also not allowed to claim the refund of ITC accumulated due to not availed in absence of availability of correct data. The scheme of the CGST Act as introduced, contemplated validation and verification of data which was to be uploaded vide Form GSTR-2 & 3. However, in absence of such statutory forms being operationalized on account of lack of technical infrastructure, Form GSTR-3B was introduced and it was required to be filled in manually. Form GSTR-3B as introduced by Rule 61 (5) being at variance with the other statutory provisions does not permit the data validation before it is uploaded. Form GSTR-3B which has been brought into operation by virtue of Section 168 of the CGST Act, in comparison with Form GSTR-3 is a summarised version. Para 4 of Circular No. 26/26/2017-GST dated 29.12.2017 is not in consonance with the provisions of CGST Act, 2017. Thus there was no findings of any convincing reasoning behind the logic for restricting rectification only in the period in which the error is noticed and corrected, and not in the period to which it relates. There is no provision under the Act that has been brought to the notice which would restrict such rectification. The restriction if any, that can be introduced by way of a circular, has to be in conformity with the scheme of the Act and the provisions contained therein. In fact, as noticed above, the earlier Circular No. 7/7/2017-GST does recognize that the reconciliation is based on amended ITC of the relevant month. This is in terms of provisions of CGST Act. the constraint introduced by para 4 of the circular, is arbitrary and contrary to the provisions of the Act and, It is trite proposition of law that circular issued by the Board cannot be contrary to the Act and the Government cannot impose conditions which go against the scheme of the statutory provisions contained in the Act.
Ruling and Order
In light of the above discussion, the rectification of the return for that very month to which it relates is imperative and, accordingly, we read down para 4 of the impugned Circular No. 26/26/2017-GST dated 29.12.2017 to the extent that it restricts the rectification of Form GSTR-3B in respect of the period in which the error has occurred. The present petition is therefore allowed and the Petitioner is permitted to rectify Form GSTR-3B for the period to which the error relates, i.e. the relevant period from July, 2017 to September, 2017. The Respondents is directed 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.
The Petitioner, therefore, cannot be denied the benefit due to the fault of the Respondents. Therefore Airtel can now claim TC of Rs 923 crore, which otherwise not available to the company for F.Y. 2017-18 and can also revise GSTR3B. Further even after the time lapse of 2 years Airtel can claim refund.