GST mismatch and input tax credit relief: return discrepancies need explanation, and later amended ITC time limits must be applied.

A GST mismatch between GSTR-1 and GSTR-3B could not be treated as a recoverable liability without first giving the assessee an opportunity to explain the discrepancy and seek rectification, because the statutory scheme contemplates intimation, reply and consideration of the explanation before recovery. Denial of input tax credit for FY 2018-19 was also unsustainable where the later amendment extended entitlement for the relevant return period up to 30.11.2021 and the return for March 2019 was filed within that limit. Relief was granted on both issues, subject only to limited reconsideration of the return discrepancy.

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Issues: (i) whether the mismatch between GSTR-1 and GSTR-3B could be treated as an admitted recoverable liability without first allowing the assessee an opportunity to explain the discrepancy and seek rectification; (ii) whether input tax credit for Financial Year 2018-19 could be denied on the ground of delay in filing when the subsequent statutory amendment permitted availment up to 30.11.2021.

Issue (i): whether the mismatch between GSTR-1 and GSTR-3B could be treated as an admitted recoverable liability without first allowing the assessee an opportunity to explain the discrepancy and seek rectification.

Analysis: The discrepancy arose from an asserted human error in reporting the tax rate and credit note particulars in GSTR-1, while the corresponding details in GSTR-3B and GSTR-9 were stated to reflect the correct position. The statutory scheme under Section 37 of the Central Goods and Services Tax Act, 2017 permits rectification of errors in outward supply details within the prescribed framework, and Rule 88C of the Central Goods and Services Tax Rules, 2017 contemplates intimation, reply, and consideration of explanation where there is a difference between liability reported in GSTR-1 and the return under Section 39. Recovery on the basis of Section 75(12) could not properly be sustained without first affording an opportunity to explain the mismatch.

Conclusion: The mismatch could not be straightaway treated as finally recoverable liability against the assessee, and the assessee was entitled to an opportunity to explain the discrepancy.

Issue (ii): whether input tax credit for Financial Year 2018-19 could be denied on the ground of delay in filing when the subsequent statutory amendment permitted availment up to 30.11.2021.

Analysis: The denial of input tax credit was founded on the original time limit under Section 16(4) of the Central Goods and Services Tax Act, 2017. That basis was displaced by the insertion of Section 16(5), which extended entitlement for invoices or debit notes pertaining to the specified financial years, including 2018-19, where the return under Section 39 was filed up to 30.11.2021. Since the return for March 2019 was filed on 13.03.2021, the statutory condition introduced by Section 16(5) stood satisfied.

Conclusion: Denial of input tax credit was unsustainable, and the assessee was entitled to claim input tax credit for the relevant financial year.

Final Conclusion: The impugned assessment order was interfered with, the assessee obtained relief on both the mismatch and input tax credit issues, and the matter was left to be reconsidered only to the limited extent of the explanation on the return discrepancy.

Ratio Decidendi: Where the statutory scheme provides for rectification and intimation of return discrepancies, a mismatch between GSTR-1 and GSTR-3B cannot be conclusively fastened as recoverable liability without opportunity to explain, and a later retrospective entitlement provision governing input tax credit must be given effect according to its terms.

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