Previous Year omitted inc declared C y GSTR1 and payment there of

[V Rajalakshmi]

One of my client had missed declaring one of the inv of P y 2021-22 which has been included in April 2022 GSTR-1 , the question is whether the payment made in the cash ledger relating to such inv to be adjusted in 3B return of April 2022 or it should be adjusted thru DRC 03 ? Is there any chance that the department may issue a notice in the future that there is a mismatch between GSTR-1 and GSTR 3B .

[KASTURI SETHI]

Adjustment through GSTR-3B in the month of April, 22 is better option and it is also very safe. Your client has declared the missed invoice on his own. It proves bona fides of your client. Your client should pay interest on his own, it may be even for one day. In this way the possibility of SCN will be ruled out, especially in the event of no loss of revenue and the benefit of bona fide act.

[Shilpi Jain]

Agree with Kasturi sir. In case where PY laibilty is to be paid after September then one can look at using DRC-03

[Hitesh Patel]

I have a slightly different view on this matter. Recently on the GST portal under Services > Returns > Tax liabilities and ITC comparison menu, specific columns (17 to 21) are added for "Payment made, if any through DRC-03". In making payment through DRC-03 also, we now get a dropdown to select "Liability Mismatch - GSTR-1 to GSTR-3B" option. In very near future, after the new Rules are notified for the proposed section 38(2)(b) the portal seem to be considering Financial Year wise checking of liability declared under GSTR-1 vis-a-vis liability paid in GSTR-3B. Any excess payment made through next financial year's GSTR-3B will not be considered (it should, however that is not the point of discussion here) in Tax liabilities and ITC comparison menu which is going to be used pre-dominantly for the purposes of proposed section 38(2)(b). Hence, it is not advisable to declare a particular financial year's liabilities through GSTR-3B of the next financial year. Had it been the case where you had to declare this missed invoice within the same financial year (but different tax period) it would be ideal to declare it in any subsequent tax period's GSTR-3B (within the same financial year). Also consider interest u/s. 50(1) which would apply on gross basis (irrespective of liability to be adjusted with ITC/cash ledger) while declaring these liabilities either through DRC-03 / GSTR-3B.

Hope this helps you in making an informed decision.

AI Summary

GST liability adjustment: declare missed prior-year invoice in current financial year's GSTR 3B and pay interest to avoid notices. Missed prior-year invoice declared later should be regularised by declaring the tax liability and paying tax with interest, preferably via GSTR 3B within the same financial year to evidence bona fides and reduce notice risk. If liability is discharged after the original financial year, DRC 03 is an alternative, but portal updates and proposed financial-year reconciliation of GSTR 1 and GSTR 3B make carrying prior-year liabilities into the next financial year's GSTR 3B inadvisable; interest must be applied on a gross basis when selecting the mechanism.