2026 (3) TMI 1429 - HC - GST

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 ... Seeking Rectification of errors in GSTR-1 - wrong mention of Credit Note in the GSTR-1 - Mismatch between GSTR-1 and GSTR-3B - statutory scheme - Denial of input tax credit​​​​​​​ - time limit under Section 16(4) - Opportunity to explain under Rule 88C - Retrospective entitlement to input tax credit - Can this mistake which crept in the GSTR-1 be allowed to be corrected subsequently. Mismatch between GSTR-1 and GSTR-3B - Rectification of bona fide errors - Opportunity to explain - HELD THAT:- The Court held that the mismatch arose from the petitioner's asserted human error in reporting the tax rate in four invoices in GSTR-1 and in wrongly mentioning the credit note, while the corresponding particulars were correctly reflected in GSTR-3B and GSTR-9F. Referring to the principle recognised in Central Board of Indirect Taxes and Customs Vs. M/s. Aberdare Technologies Private Limited and Others [2025 (4) TMI 101 - SC ORDER], the Court held that bona fide errors in GSTR-1 are capable of correction. It further noted that Rule 88C contemplates intimation and an opportunity to explain such mismatch, but the authority proceeded straightaway on the basis of the Explanation to section 75(12) and imposed liability without calling for the petitioner's explanation. In that view, the petitioner had to be given an opportunity to explain the mismatch and produce material to show that the applicable tax on the four invoices was 12% and not 18%. [Paras 26, 27, 28] The impugned order was set aside on this aspect and the petitioner was granted time to explain the mismatch before the proper officer, who was directed to decide the acceptability of the explanation and proceed in accordance with the Act and the Rules. Input tax credit beyond section 16(4) - Retrospective operation of section 16(5) - HELD THAT: - The Court held that the basis on which the authority had denied input tax credit stood displaced by the insertion of section 16(5), which operates notwithstanding sub-section (4) and applies to invoices or debit notes pertaining to Financial Years 2017-18, 2018-19, 2019-20 and 2020-21. Since the petitioner's GSTR-3B for March, 2019 was filed on 13.03.2021, it fell within the extended statutory window up to 30.11.2021. Consequently, the rejection of the petitioner's claim for input tax credit for that period was unsustainable in law. [Paras 29, 30, 31] The denial of input tax credit was held unsustainable, and the petitioner was declared entitled to claim input tax credit for the returns filed for Financial Year 2018-19 in terms of section 16(5) of the CGST Act. Final Conclusion: The Court set aside the impugned order under section 73. It held that the petitioner must be given an opportunity to explain the GSTR-1 and GSTR-3B mismatch, and that the denial of input tax credit for Financial Year 2018-19 was unsustainable in view of section 16(5). 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.