Summary: Under Section 61 of the CGST Act, 2017, GST officers scrutinize returns to identify discrepancies, often focusing on mismatches between Input Tax Credit (ITC) claimed in GSTR-3B and auto-populated in GSTR-2B. If discrepancies exceed a threshold (e.g., 5% or 10%), notices are issued. Taxpayers must provide explanations or take corrective actions. Acceptable explanations result in no further action, but unsatisfactory responses may lead to audits, inspections, or tax determinations under various sections of the Act. To respond, taxpayers should note the communication date, download the notice from the GST portal, and assess the discrepancies. Common issues include unfiled supplier GSTR-1, missing credit notes, or unpaid reverse charge mechanism (RCM) ITC. Resolutions involve paying discrepancies with 24% interest via DRC-03 and reconciling ITC discrepancies by preparing a detailed reconciliation table comparing ITC claimed and reported. Draft replies should reference CGST provisions, include reconciliation details, and attach supporting documents like invoices and payment proofs. Accurate responses with proper documentation can help avoid further litigation.
How to Reply to Notices Issued Under Section 61 of the CGST Act, 2017
Section 61 of the CGST Act, 2017 defines the scrutiny of returns. The proper officer may scrutinize the return and related particulars furnished by the registered person to verify the correctness of the return. The officer will inform the taxpayer of any discrepancies noticed and seek an explanation in the prescribed manner.
1. Acceptance of Explanation: If the explanation is found acceptable, the registered person will be informed, and no further action will be taken.
2. Inadequate Explanation: If the explanation is not satisfactory or if the taxpayer fails to take corrective measures after accepting the discrepancies, the proper officer may initiate further actions. These actions may include departmental audits (Section 65), special audits (Section 66), inspection, search, and seizure (Section 67), or determining tax dues under Section 73 or Section 74.
Common Trends in Notices
From observations, GST officers often rely on discrepancies between the Input Tax Credit (ITC) claimed in GSTR-3B and the ITC auto-populated in GSTR-2B. If the discrepancy exceeds a certain threshold (e.g., 5% or 10%), notices are issued to the taxpayer.
Steps to Respond
1. Understand the Communication Date:
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- The communication date is the receipt date of the SMS or email sent to the registered email ID listed on the GST portal.
2. Download the Notice:
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- Navigate to the “Services” tab and download the notice from the “Additional Notices” section.
3. Assess the Discrepancy:
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- Identify the reasons for the discrepancy. Common instances and their solutions are outlined below:
| Instances | Solutions |
| The ITC has been claimed in GSTR-3B but not appearing in 2B | Pay the tax not appearing along with interest @24% p.a. through DRC-03 for the period ITC claimed in excess and request the supplier to file their GSTR-1. |
| Credit note issued by the supplier but no effect has been made in 3B return filed by the taxpayer. | Pay the ITC not reversed along with interest @24% p.a. for the period in deficiency. |
| RCM ITC not paid | Pay the RCM along with interest @24% |
Other instances may also arise, and the taxpayer must reconcile and pay GST liability with applicable penal interest on any ineligible ITC claimed.
Reconciliation Process
Reconciliation is crucial for identifying differences between ITC claimed in GSTR-3B and ITC appearing in GSTR-2B. Prepare a reconciliation table as follows:
| Particulars | IGST | CGST | SGST | Total |
| ITC Claimed in GSTR – 3B | ||||
| Add: ITC Not Yet Claimed: (due to non-receipt of goods/any other reason (mention the same) | ||||
| Add: ITC wrongly claimed in F.Y. 2023-24 but appearing in GSTR-2B in F.Y. 2024-25 | ||||
| Less: ITC Claimed from Previous Year (i.e. F.Y. 2023-24) –(add invoice wise detail) | ||||
| Rounding off difference | ||||
| ITC as per GSTR-2B |
Attach relevant invoices for ITC claimed from previous years to avoid further litigation.
Drafting the Reply
While drafting a reply:
- Mention relevant provisions of the CGST Act and rules.
- Provide a detailed reconciliation statement.
- Include supporting documents, such as invoices and payment proofs.
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For further assistance or to request a draft reply which have been submitted to the authorities, please feel writing to us at: taxesbydk@gmail.com.
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