Rectification of bonafide GST Form/Return Errors: Recent Judicial Decisions & Regulatory Changes

Rectification of bonafide and inadvertent mistakes committed at the time of filing/submitting of GST Forms/ Returns

Introduction: Ensuring accuracy in Goods and Services Tax (GST) filings is crucial for both taxpayers and the government. However, errors can occur inadvertently during the filing of GST forms and returns. In response to such errors, recent judicial decisions and regulatory changes have provided clarity on the rectification process. This article delves into these developments and their implications for taxpayers.

In line with the recommendations made by the GST Council during its 48th Meeting, the CBIC issued Circular No. 183/15/2022-GST dated December 27, 2022 (“Circular No. 183”), which outlined the procedure for verifying the discrepancies between the Input Tax Credit (“ITC”) availed in Form GSTR-3B and the credit available in Form GSTR-2A during the Financial Year (“F.Y.”) 2017-18 and F.Y. 2018-19. Further, Circular No. 183 allowed the rectification of such bonafide and inadvertent mistakes committed while filing of GST Form/ Return during F.Y. 2017-18 and F.Y. 2018-19.

Subsequently, the GST Council in its 50^th Meeting held on July 11, 2023, to provide further relief to the taxpayers, recommended for issuance of another similar circular w.r.t. procedure for verification of ITC discrepancies between the credit availed in Form GSTR-3B and the credit available as per Form GSTR-2A during the period from April 01, 2019 till December 31, 2021.

Accordingly, as per the recommendations of the GST Council, the CBIC issued Circular No. 193/05/2023-GST dated July 17, 2023 (“Circular No. 193”) for providing the clarification to deal with the difference in ITC availed in Form GSTR-3B vis a vis that available as per Form GSTR-2A for the period April 01, 2019 to December 31, 2021.

The CBIC vide Circular No. 193, extended the applicability of procedure specified in Circular No. 183 for dealing with differences between ITC claimed in Form GSTR-3B and as available in Form GSTR-2A for the period from April 1, 2019 to December 31, 2021. However, Rule 36(4) of the Central Goods and Services Tax Rules, 2017 (“the CGST Rules”) was made operational from October 9, 2019, which prescribed the condition with limit to avail ITC on invoices/debit notes not uploaded by the supplier in Form GSTR-1/IFF inter alia permitting only specified additional credit (20% w.e.f. October 09, 2019 / 10% w.e.f. January 01, 2020 / 5% w.e.f. January 01, 2021) over and above the ITC available in Form GSTR-2A. Thus, even after complying with the procedure as per Circular No. 183, only following additional ITC may be claimed over and above the credit reflected in Form GSTR-2A:

• For the period from April 1, 2017 to October 8, 2019: Without any limit
• For the period from October 9, 2019 to December 31, 2019: 20% of eligible credit as per Form GSTR-2A
• For the period from January 1, 2020 to December 31, 2020: 10% of eligible credit as per Form GSTR-2A
• For the period from January 1, 2021 to December 31, 2021: 5% of eligible credit as per Form GSTR-2A

Judicial Pronouncements:

In this regard, recently various courts have allowed the rectification of the bonafide and inadvertent mistakes committed by the taxpayers, at the time of filing/submitting of GST Forms/ Returns, which occurred due to certain bonafide reasons, unavoidable circumstances, and sufficient cause, in order to claim the ITC by the recipient of the supplies.

♦ Assessee allowed to rectify bonafide errors committed in filing GSTR-1 for F.Y. 2017-2020

The Hon’ble Karnataka High Court in M/s. Wipro Limited India v. the Assistant Commissioner of Central Taxes and Ors. [Writ Petition No. 16175 of 2022 (T-Res) dated January 6, 2023] has allowed the assessee to rectify the errors committed at the time of filing of Form GSTR-1. Held that, the error committed by the assessee in showing the wrong Goods and Services Tax Identification Number (“GSTIN”) in the invoices, which was carried forward in the relevant Forms is a bonafide error, which has occurred due to bonafide reasons, unavoidable circumstances and sufficient cause. Hence, the Circular No. 183, which allows rectification of such bonafide and inadvertent mistakes, would be directly and squarely applicable. Further, allowed the assessee to avail the benefit of the Circular No. 183 for F.Y. 2019-20 also.

Author’s view:

It is pertinent to note that, even before such clarification as provided by the Circular No. 183, the Hon’ble Madras High Court in Pentacle Plant Machineries Pvt. Ltd. v. Office of the GST Council and ors. [W.P. No. 1022 of 2020, dated February 23, 2021] had allowed the assessee to correct a “human error” while filing Form GSTR-1, wherein, the assessee mentioned the GST number of the purchaser in Uttar Pradesh instead of the GST number of the purchaser in Andhra Pradesh. It was held that, in the absence of enabling mechanism, the assessee should not be prejudiced from availing credit to which they are otherwise legitimately entitled to and the error committed is an inadvertent human error which the assessee should be in a position to rectify the same in the absence of an effective enabling mechanism under statue.

♦ Registered Person allowed to rectify its GSTR-1 after the specified due date, for showing B2B Supplies wrongly as B2C Supplies:

The Hon’ble Orissa High Court in the matter of M/s. Shiva Jyoti Construction v. The Chairperson, Central Board of Excise & Customs and others [W.P. (C) No. 18216 of 2017 dated January 12, 2023] permitted the assessee to rectify its Form GSTR-1 filed for the months of September 2017 and March 2018, in order to claim ITC benefit by the recipient, wherein B2C supplies was erroneously mentioned, instead of B2B supplies. Held that, the assessee will be unnecessarily prejudiced if it is not allowed to avail the benefits of ITC.

Recently, in a similar matter, the Hon’ble Orissa High Court in M/s. Y. B. Constructions Pvt. Ltd. v. Union of India and others [W.P.(C) No.12232 of 2021 dated February 22, 2023] has permitted the assessee to rectify the error of mentioning B2C instead of B2B at the time of filing Form GSTR-1. Held that, the assessee would be prejudiced if it is not allowed to rectify such mistake and avail the benefits of ITC. Directed the Revenue Department to receive the corrected Form GSTR-1 manually and upload the details on the web portal within 4 weeks.

On similar line, in recent past, the Hon’ble Jharkhand High Court in Mahalaxmi Infra Contract Ltd. v. GST Council [W.P.(T) No. 2478 of 2021, dated October 18, 2022] had allowed the assessee to amend its Form GSTR-1 to rectify mistake of wrong GSTIN mentioned against invoices raised on purchaser.

Further, the Hon’ble Calcutta High Court in T.M.C. – Hi-tech. v. Assistant Commissioner State GST [W.P.A. No. 1611 of 2022 dated July 12, 2022] had also directed the Revenue Department to consider the representation of the assessee to rectify Form GSTR-1 and pass a reasoned order after hearing, wherein, certain entries were mistakenly shown in B2C column instead of B2B column in Form GSTR-1 by the assessee.

However, in this regard, a contrary view has been taken by the Hon’ble Telangana High Court in M/S Yokohama India Private Limited v. the State of Telangana [Writ Petition No.15284 of 2022 dated October 31, 2022] stating that, beyond the statutorily prescribed period, an assessee cannot be permitted to carry out rectification which would inevitably affect obligations and liabilities of other stakeholders because of the cascading effect in the electronic records. Further, denied the rectification of Form GSTR-1 for error by the supplier in mentioning the details of the recipient in Form GSTR-1 on account of the limitation period prescribed in Section 39(9) the Central Goods and Services Tax Act, 2017 (“the CGST Act”) to rectify omission/errors in Form GSTR-1.

♦ Assessee permitted to make changes in Form GSTR-3B for the months of July, 2017 and March, 2018

The Hon’ble Karnataka High Court in M/s. Orient Traders v. the Deputy Commissioner of Commercial Taxes (Audit) [Writ Petition No. 2911 of 2022 (T-RES) dated December 16, 2022] has permitted the assessee to make the necessary changes to its Form GSTR-3B returns for the months of July 2017 and March 2018. Held that, allowing the assessee to make such changes, would not cause any prejudice to the Revenue Department nor would it upset the chain of credit under the GST scheme. Further held that, the authorities must avoid a blinkered view while adjudicating/assessing the tax liability of a dealer under the CGST Act.

♦ Assessee directed to file representation grievances pertaining to technical glitches in its GST portal

The Hon’ble Madras High Court in M/s Lucas TVS Limited v. Superintendent of GST and Central Excise and Ors. [W.P. No. 3636 of 2023 and W.M.P. No. 3720 of 2023 dated February 10, 2023] has directed the assessee to file a representation before the Revenue Department stating grievances pertaining to technical glitches in the GST portal. Held that, no prejudice will be caused to the Revenue Department, if the assessee’s representation seeking for release of the blocked funds in the Petitioner’s Bank account is considered, on merits and in accordance with law.

♦ Refund cannot be denied for an inadvertent error which was subsequently rectified

The Hon’ble Delhi High Court in the matter of M/s. Shri Shyam Footwear v. the Commissioner of Central Goods and Services Tax and Anr. [W.P. (C). 5845 of 2022 dated January 31, 2023] has set aside the order of the Revenue Department rejecting the refund application of the assessee on the grounds that the rectified information submitted by the assessee was not taken into account while passing such order. Held that, the assessee cannot be penalised for an inadvertent error in submitting an erroneous information, which had already been rectified. Further that, it is essential for the Revenue Department to examine the information as submitted by the assessee and process its claim for refund of unutilized ITC in accordance with law.

♦ Revenue Department cannot retain any amount that has been erroneously paid as tax while filling Form GSTR-1

The Hon’ble Andhra Pradesh High Court in M/s. Varshan Enterprises v. Office of the GST Council [Writ Petition No.10637 of 2021, dated December 12, 2022] wherein, the assessee sought to rectify the details of the recipient of the service due to inadvertent mistake while filling Form GSTR-1 or allow refund claim of tax wrongly paid. It was held that, the Revenue Department cannot retain any amount that has been paid as tax as a result of any inadvertent error, where the error committed by the assessee being accidental, it shall have the opportunity to rectify it. Further, directed the assessee to make an application in manual form for refund of the amount.

Conclusion:

Circular No. 193 provided the much needed clarity to the taxpayers as well as the Revenue Department for determining the GST liability in such issues for the period from April 01, 2019 till December 31, 2021. Further, w.e.f. January 1, 2022, Section 16(2)(aa) of the CGST Act had been inserted along with the amendment in Rule 36(4) of the CGST Rules, therefore, no ITC would be allowed unless reported by supplier in Form GSTR-1 and communicated to recipient in Form GSTR-2B. Thus, such cases of additional claim would not arise in future periods.

Furthermore, limiting the credit from October 9, 2019 in accordance with Rule 36(4) of the CGST Rules, would cause challenges if there are genuine errors by supplier while filing its Form GSTR-1 and the outstanding GST liability has been discharged. The proper officer should have been given this discretion so that they may evaluate legitimate and genuine issues.

It is suggested that the taxpayers may be permitted to amend any such bonafide mistakes in Form GSTR-1 even after specified due dates for rectification of any omission or error in Form GSTR-1, for the following reasons:

• The situation is wholly revenue neutral and there is no loss to the govt. exchequer as the taxes are already deposited.
• It would be unnecessarily prejudiced if the recipient is not allowed to avail the benefits of ITC on such mistakes, which could not be corrected within specified time period.
• Automated GST Return System with GST ITC matching and mis-matching provisions were not implemented, as envisaged in Sections 37, 38, 39, 42, 43 and 43A of the CGST Act and rules made thereunder, which either stands modified or omitted w.e.f October 01, 2022 (Applicable Prospectively only).