Follow Us:
  2. Goods and Services Tax
  3. Articles

Discrepancy In Stock And Action Under Section 130 of CGST Act, 2017

It is often seen that during inspection and search, the stock is found in excess of the stocks as per books. Such excess stock is subject to levy of tax as Section 36(6) of the Act provides that in the event the person fails to keep their accounts for the goods or the services in accordance with the provisions of Section 35(1), the proper officer is empowered to determine the amount of tax payable on the goods or services which are unaccounted for as if such goods or services had been supplied by such person and the provisions of Section 73 and 74 shall mutatis mutandis apply for the determination of tax.

The tax is to be determined for excess stock under Section 73 or 74 of the CGST Act, 2017 and not under Section 130, which is not applicable in such cases.

The case of excess stock would not fall under Section 130(i) (ii) or (iv) of CGST Act as the liability to pay tax arises at the time of point of supply and not at any other point earlier than that the scope of Section 130(1)(ii) is that any assesse who is liable to pay tax and does not account for such goods, after the time of supply is occasioned, would be liable to penalty this clause. Section 130(1)(iv) can be invoked by the Department when the Department establishes that there were a contravention of the Act and Rules coupled with the intent to evade the payment of tax. If the stock is found in excess, proceedings, under Section 73 and 74 of the Act will come into play and proceedings under Section 130 of the Act cannot be initiated.

In Field Umraipurwa v. Additional Commissioner (2026) 104 GSTL 97; (2025) 112 GST 785; (2025) 11 TMI 296; (2025) 180 taxmann.com 222 (Allahabad), where excess stock was found during a survey conducted at assessee’s premises and discrepancies were recorded, confiscation of goods was done and penalty proceedings initiated, it was observed and held that proceedings admittedly arose from survey alleging unaccounted stock. Section 35 of CGST/UPGST Act, 2017 required true and correct accounts and sub-section (6) mandated tax determination under section 73 and 74 for goods not accounted for. Since statute prescribed this specific route, recourse to section 130 was impermissible in such facts. The Court observed that Apex Court has categorically held in Vijay Trading Company [(2025) 30 Centax 214 (SC)] and PP Polyplast Pvt. Ltd. [(2025) 30 Centax 425 (SC) that proceedings under Section 130 cannot be put to service if excess stock is found at time of service. In view of same, impugned order could not be sustained. [Also see:

Tags:

Kindly Refer to Privacy Policy & Complete Terms of Use and Disclaimer.

Author Bio

Name: Dr. Sanjiv Agarwal
Qualification: CA in Practice
Company: Agarwal Sanjiv & Company
Location: Jaipur, Rajasthan, IN
Member Since: 03 Oct 2019 | Total Posts: 534
View Full Profile

My Published Posts

GSTN Issues Advisories on Appeals, Pre-Deposit, GSTR-3B Interest & IMS Tool Tax Recovery Proceedings Under GST Law Can Cash Be Seized during GST Search? GST Advisories on Appeals, HSNS Registration & GSTR-3B Liability Breakup GST Inspection Under Section 67 of CGST – Steps Involved View More Published Posts

Join Taxguru’s Network for Latest updates on Income Tax, GST, Company Law, Corporate Laws and other related subjects.

Leave a Comment

Your email address will not be published. Required fields are marked *

Latest Posts

View All Posts
Ads Free tax News and Updates

Featured Posts

View All Featured Posts

Popular Posts

Search Post by Date
May 2026
M T W T F S S
 123
45678910
11121314151617
18192021222324
25262728293031