Mismatch in Form GSTR-1 and Form GSTR-3B does not warrant direct recovery under Section 75(12) of the CGST Act
The Calcutta High Court recently ruled in Kuddus Ali v. Assistant Commissioner of Central Tax that a discrepancy between Form GSTR-1 (outward supplies details) and Form GSTR-3B (monthly return) does not automatically permit direct tax recovery under Section 75(12) of the CGST Act. The court observed that Section 75(12) applies when self-assessed tax from GSTR-1 is not included in GSTR-3B. In this case, the self-assessed tax from GSTR-1 was included in GSTR-3B, even if there were other discrepancies like late fee and interest. The court found that the department incorrectly invoked Section 75(12) to directly recover the amount without issuing a proper show cause notice (SCN) and following the procedures outlined in Sections 65, 66, 67, 73, or 74 of the CGST Act, which are necessary when an explanation provided by the taxpayer is deemed unacceptable. The court quashed the demand order and allowed the taxpayer to respond to the initial Form ASMT-10 notice, treating the impugned order as an SCN. This ruling clarifies that for a direct recovery under Section 75(12), the self-assessed tax from GSTR-1 must genuinely be missing from GSTR-3B, not merely subject to other discrepancies or delayed payments.
Facts:
Mr. Kuddus Ali (“the Petitioner”) received a notice in Form ASMT-10 on September 20, 2024 with identifying the discrepancies in the GST returns for Financial Year (“F.Y.”) 2020-2021 on account of short payment of duty of Rs. 8,09,248/-.
Thereafter, the Petitioner responded to the notice issued by the Department, explaining that insofar as the discrepancy in the liability declared in Form GSTR 9 is concerned, the Petitioner had mistakenly disclosed higher liability of Integrated Goods and Services Tax (“IGST”) of Rs. 2,99,98,122/- in table 4N of Form GSTR-9 against the actual liability of Rs. 2,91,22,135/- in IGST column which had been declared in Form GSTR-9C Table 9 filed on October 07, 2024.
Insofar as discrepancy of delayed filing of return in Form GSTR 3B attracting late fees and interest is concerned, the Petitioner admitted that there had been delay and having regard thereto, the Petitioner had sought for payment of interest on the sum due in instalments.
Further, a demand had been raised, which had been communicated to the Petitioner in Form DRC-07 dated January 06, 2025, though, the detailed order thereto appears to have been passed on December 20, 2024 (“the Impugned Order”).
The Petitioner questioned the aforesaid determination and contended that no SCN had been issued. The Respondents have purported to straight away adjudicate upon the Petitioner’s liability and have proceeded further and did not stop there rather directly proceeded to recover the aforesaid amount by invoking the provisions of Section 75(12), which is not permissible.
The Respondents contended that that it is within the rights of the Respondents to call upon the Petitioner to make payment of the admitted amount which is payable as self-assessed tax in Form GSTR-1. By referring to the provisions of Section 75(12), it is submitted that where any amount of self-assessed tax (Form GSTR-1) in accordance with a return furnished under Section 39 (Form GSTR-3B) remains unpaid, either wholly or in part, or the amount of interest payable on such tax remains unpaid, the same shall be recovered under the provisions of Section 79 and no separate adjudication order is necessary.
Hence, aggrieved by the Impugner Order, the Petitioner filed the Writ Petition.
Issue:
Whether mismatch in Form GSTR-1 and Form GSTR-3B does not warrant recovery under Section 75(12) of the CGST Act?
Held:
The Hon’ble Calcutta High Court in Writ Petition Application No. 6004 of 2025 held as under:
- Observed that, having regard to the explanation provided under Section 75(12) of the CGST Act, the expression “self-assessed tax” shall include tax payable in respect of the details of outward supplies furnished under Section 37 of the CGST Act i.e. Form GSTR-1 which are not included in the return furnished under Section 39 of the CGST Act i.e Form GST-3B. Admittedly, in the present case, it would transpire that the self-assessed tax of the Petitioner under in Form GSTR-1 has been included inform GSTR-3B. Once the self-assessed tax in Form GSTR-1 is included in Form GSTR-3B, Section 75(12) can no longer be invoked.
- Noted that, a bare perusal of the notice issued in Form ASMT 10 dated September 20, 2024 would in no uncertain terms disclose that the returns filed by the Petitioner in Form GSTR-1 had been included in Form GSTR-3B. It would also transpire from the Impugned Order that the Respondents have proceeded to determine late fees and interest by proceedings to demand, the same from the date of filing of return in Form GSTR-3B. The Respondents could not have invoked the provisions of Section 75(12), nor could the Respondents claim that the demands made by the Respondents which are based on admissions made by the Petitioner. Further, as provided in Section 61(3) in case the explanation furnished by the Petitioner is found unacceptable that there is no option but to initiate appropriate action under the provisions of Section 65 or 66 or 67 or 73 or 74 of the CGST Act and not Section 75(12) of the CGST Act.
- Held that, the determination made by the Respondents cannot be sustained. The same is set aside. However, at the same time, having regard to the admission made by the Petitioner in response to the Form ASMT 10, the Impugned Order passed can be treated as a SCN and having regard thereto, the Petitioner shall be at liberty to respond within a period of three weeks from date. Lastly, Since the Impugned Order dated has been set aside the consequential demand raised by the Respondents in Form GST DRC 07 dated January 06, 2025 for the tax period 2020-21 stands quashed.
Our Comments:
However, Section 75 of the CGST Act governs that “General provisions relating to determination of tax.” Further, Section 75(12) of the CGST Act prescribes that notwithstanding anything contained in section 73 or section 74 or section 74A, where any amount of self-assessed tax in accordance with a return furnished under section 39 of the CGST Act remains unpaid, either wholly or partly, or any amount of interest payable on such tax remains unpaid, the same shall be recovered under the provisions of section 79 of the CGST Act.
The GST officers can directly initiate recovery action against businesses showing higher sales in their monthly Form GSTR-1 returns but under-reporting it while paying tax in Form GSTR-3B. The government vide Section 114 of the Finance Act, 2021 (“the Finance Act”), inserted an explanation to Section 75(12) of the CGST Act to retrieve self-assessed tax.
This move was brought curb fake billing whereby sellers show higher sales in their Form GSTR-1 to enable the buyer to claim a higher Input Tax Credit (“ITC”) but report lower sales in their Form GSTR-3B to lower their GST tax liability. For businesses, it’s now imperative that their Form GSTR 3B and Form GSTR-1 match with each other, and no variances would be permitted in the same.
The provisions of Section 75(12) of the CGST Act states that the recovery proceedings will be initiated in case of any unpaid self-assessed tax as per the return furnished under Section 39 of the CGS.
With the help of this explanation in Section 75(12) of CGST Act, the government has clarified that “self-assessed tax” would include the GST payable for outward supplies reported in the Form GSTR-1 but not included in the return furnished by the taxpayer in his Form GSTR-3B.
Now, as per Section 75 of the CGST Act, where there’s any unpaid self-assessed tax, it could be recovered without issuing any SCN, and the proceedings for recovery under Section 79 could be directly invoked.
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