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Arjuna (Fictional Character): Krishna, why there is huge cry among the taxpayers due to insertion of explanation to sec 75(12) stating that tax declared in GSTR 1 will be considered as “self-assessed tax” for the purpose of sec 75(12) even though not included in GSTR 3B effective from 1st January 2022?

Krishna (Fictional Character): Arjuna, the CBIC have inserted strict barriers on claiming of Input Tax Credit only to the extent of ITC reflected in GSTR-2B based on GSTR 1 filed by the supplier and further as a result of insertion of the above explanation, where the tax payable in respect of details of outward supplies furnished by the registered person in GSTR 1, but has not been paid through GSTR 3B, either wholly or partly, will be considered as the tax short paid on such self-assessed basis and thus the same is self-admitted liability. Thereon same are liable to be recovered under the provisions of section 79 with or without issuing show cause notice.

Arjuna (Fictional Character): Krishna, what are the points that needs to be considered by officer before initiation of recovery without issuing the show cause notice?

Krishna (Fictional Character): Arjuna, following are the points that needs to be considered by officer before initiation of recovery without issuing the show cause notice:

When recovery will be initiated on difference between GSTR-1 & 3B

  • In case of any typographical error identified in GSTR 1 the same can be rectified only in the GSTR 1 of subsequent months.
  • Where a supply could not be declared by the registered person in GSTR 1 of an earlier tax period, though the tax on the same was paid by correctly reporting the said supply in GSTR-3B. The details of such supply may now be reported by the registered person in the GSTR 1 of the current tax period. In such cases, there could be a mismatch between GSTR 1 and GSTR 3B in the current tax period.

Therefore, in all such cases, an opportunity should be provided to the concerned registered person to explain the differences between GSTR 1 and GSTR 3B, if any.

Arjuna (Fictional Character): Krishna, is it legally valid to initiate recovery without issuing the show cause notice?

Krishna (Fictional Character): Arjuna, one needs to see as to how the officer can override the below mentioned provisions and go for the initiation of recovery even before the time limit provided by the act itself to rectify its error is over:

  • CGST Act, itself gives time limit till September of next financial year to rectify any error or omission in various provisions.
  • The proper officer may scrutinize the return under section 61 to verify the correctness of the return and inform him of the discrepancies noticed, if any, in such Form GST ASMT 10 and seek his explanation thereto.

Further in case of Mahadeo Construction Co. Vs Union of India the Hon’ble High Court directed the respondent to initiate appropriate adjudication proceeding either under Section 73 or 74 of the act instead of issuing recovery proceedings under Section 79 of the act directly.

Arjuna (Fictional Character): Krishna, what should the taxpayer learn from this?

Krishna (Fictional Character): Arjuna, If, the taxpayer is able to justify the differences between GSTR 1 and GSTR 3B, then there may not be any requirement to initiate proceedings for recovery under section 79. On the other hand, if the said registered person either fails to provide justification to the officer or fails to make the payment of amount due then the proceedings for the recovery of the said amount as per the provisions of section 79 may be initiated against him.

Author Bio

Qualification: CA in Practice
Company: R.B. Sharma and Co
Location: Aurangabad, Maharashtra, India
Member Since: 27 Jan 2018 | Total Posts: 346
1. Vice-Chairmen of WIRC of ICAI for the year 2015-2021. 2. Youngest Chairman of Aurangabad Branch of WIRC of ICAI in 2002. 3. Author of Popular Tax articles series based on Krishna and Arjuna conversation i.e “KARNITI” published in Lokmat on every Monday. Till date 335+ weekly articles ha View Full Profile

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