Bharti Airtel Limited Vs Union of India & Ors. (Delhi High Court)
Issue Involved –
Whether Circular No. 26/26/2017 stating that GSTR-3B can be corrected only in the month in which errors have been noticed is in line with the statutory provisions of the CGST Act, 2017 (‘Act’)
Facts of the Case
Petitioner had inadvertently paid excess cash while filing GSTR-3B for the period Jul’17 to Sep’17 (‘relevant period’) owing to non-identification and non-availment of due Input Tax Credit (‘ITC’)
For Example:
Output invoices were accidentally missed while filing GSTR-3B;
Credit Notes pertaining to invoices issued under the erstwhile regime were overlooked, as a result, the output tax liability was over-reported;
Stock transfers under a single GST registration was reported as ‘supply’;
In a few instances, NIL GSTR-3Bs were filed while there was output tax liability;
In Oct’18, when GSTR-2A was operationalized, petitioner realized that for the relevant period, ITC has been under-reported and estimates that there has been excess payment of taxes to the tune of INR 923 crores
- The Petitioner now desires to correct its returns. However, in the absence of any enabling statutory provision, petitioner is unable to correct the returns filed.
Relevant Circulars
Circular No. 7/7/2017-GST dated 01.09.2017, provides for system based reconciliation of information furnished in GST returns and specifically stated as under:
Para 6 – Any differences in the details of outward supplies and ITC will be corrected in that particular month to which the details pertain
Para 9 – Where eligible ITC recorded in GSTR-3B is less than ITC shown in GSTR-2A, ITC will be correctly reflected in GSTR-3B in that very month
Circular No. 26/26/2017-GST dated 29.12.2017 (‘relevant circular’), kept the above circular in abeyance due to non-availability of GSTR-2A functionality and stated as under:
Para 4 – GSTR-3B can be corrected only in the month in which the errors were noticed
Petitioner’s Contentions
Relevant circular is contrary to the scheme of Act since Act provided for the reconciliation of data through an IT system of Government and rectification of errors in the same month to which data relates;
Inability of the Government to run IT system as per Act’s structure resulting in a delay in the operationalization of GSTR-2A, cannot prejudice the rights of the taxpayer to take the ITC in the month it was due;
Respondent’s Contentions
If changes to particulars already furnished are allowed to be reflected in the return which is already filed by the supplier, it would also result in the requirement of modification of particulars furnished by the recipient
For example, if supplier reduces the tax liability for an earlier tax period, this would also mandate recipient to modify GSTR-3B to reduce ITC claimed on such supply, which would eventually enhance the compliance burden on the recipient;
Another complexity would arise where such recipient is an exporter and claims refund of unutilized ITC, in such cases, reduction of ITC by the recipient may invite demand for an erroneous refund of taxes.
Observations of the Court
The scheme envisaged under Act, provided for a facility to reconcile the monthly data through the IT system of the Government;
The statutory provisions provide for a right and a facility, by which it can be ensured ITC availed and returns can be corrected in the very month to which they relate;
If the statutorily prescribed returns viz., GSTR-2 and GSTR-3 had been operationalized, the Petitioner would have known the correct ITC available to it in the relevant period, and could have discharged its liability through ITC;
FORM GSTR-3B is required to be filed manually and does not provide various checks as envisaged in the Act;
Para 4 of the relevant circular is not in consonance with the provisions of Act and accordingly High Court permitted the petitioner to rectify GSTR-3B filed during the relevant period;
High Court also observed that circulars issued by CBIC and Customs cannot be contrary to Act
Observations
This decision would be welcomed by the taxpayers who could not avail the due ITC or paid excess tax in the starting phase of GST implementation in India;
Hon’ble High Court has not specified how this decision will be practically implemented. Thus, we may have to see whether rectification facility will be made available on the GST portal or rectification will be available through manual filings by the specific taxpayers;
It is also pertinent to understand that such a decision shall have limited applicability to specific facts, situations, and the period. Thus each case has to turn on its own facts;
Assessees cannot be visited with adverse consequences where the government has failed to implement the statutory scheme under GST;
The High Court has held that GSTR-3B does not permit the data validation before it is uploaded. So, ground in the future may be available to the taxpayers that the tax paid on the basis of this return is provisional and not final, where errors could be attributed to non-implementation of the system;
Cases where payments were made in cash awaiting the availability of TRAN-1, the possibility of seeking rectification to reflect such credit in GSTR-3B for initial months can be explored;
In addition to the above, the Petitioner also made submissions FORM GSTR-3B is not a return in place of FORM GSTR-3. However, Hon’ble High Court has not commented on this aspect.
Source- Bharti Airtel Limited Vs Union of India & Ors. (Delhi High Court); W.P. No. 6345/2018; 05/05/2020
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