Payment under DRC-03 on account of ASMT due to debit Note

[MANOHAR KALBURGI]

Dear Sir,

We have received an ASMT-10 for collecting 12% GST instead of 18% GST, now we are willing to discharge the demand raised in ASMT-10. Question arised before us are;

1. Whether payment to be made thru DRC-03u/s 73 ? or

2. Whether payment to made thru normal monthly GSTR-3B (means incorporate the debit note in GSTR-1 and filing the GSTR-3B later on) If this is done even buyer will get the ITC for debit note.

Please suggest us the best correct option for making the payment.

Thank you in advance

[KASTURI SETHI]

Whether you make payment through DRC-03 or GSTR-3 B, the department will issue ASMT-12 for acceptance of your payment of tax.. The department may accept payment of GST under Section 73 or 74 as per Section 61(3). If accepted under Section 74, ITC will not be allowed as per Section 17 (5)(i) of CGST Act.

It is an undisputed fact that you are making payment on being pointed out by the department. As per GST law, such payment is out of the gamut of 'voluntary payment'. Anyhow the department may take lenient view by accepting payment of tax under Section 73 and not under Section 74 depending upon your strong reasoning of bona fide mistake.

[Vijay kumar]

While agreeing with the views of Kasturi ji, I would like to add that Section 74 invocation depends on whether "suppression" as defined therein is attracted in this case or not. Department will decide the issue based on facts of your case.

[rajkumar shukla]

DRC-03 would be better to track any particular payment and convince the department for demand under section 73. However if Department insists on payment of 15% penalty, rest assured that they are treating it under section 74 and hence ITC to buyer will not be available.

[Amit Agrawal]

Just to add to what other professional collegue/s pointed out:

A. Section 17 (5) (i) states that 'notwithstanding anything contained in sub-section (1) of section 16 and subsection (1) of section 18, input tax credit shall not be available in respect of any tax paid in accordance with the provisions of sections 74, 129 and 130'.

B. Section 39 (9) reads as follows:

"1[Where] any registered person after furnishing a return under sub-section (1) or sub-section (2) or sub-section (3) or sub-section (4) or sub-section (5) discovers any omission or incorrect particulars therein, other than as a result of scrutiny, audit, inspection or enforcement activity by the tax authorities, he shall rectify such omission or incorrect particulars 5[in such form and manner as may be perscribed], subject to payment of interest under this Act:

Provided that no such rectification of any omission or incorrect particulars shall be allowed after 12[the thirtieth day of November] following 6[the end of the financial year to which such details pertain], or the actual date of furnishing of relevant annual return, whichever is earlier."

C. Rule 53 (3) states that 'Any invoice or debit note issued in pursuance of any tax payable in accordance with the provisions of section 74 or section 129 or section 130 shall prominently contain the words “INPUT TAX CREDIT NOT ADMISSIBLE”.'

D. but, rule 36 (3) states that 'No input tax credit shall be availed by a registered person in respect of any tax that has been paid in pursuance of any order where any demand has been confirmed on account of any fraud, willful misstatement or suppression of facts.'

As said by other professional collegues, reasons for short-payment of taxes earlier & bonafide belief / genuineness of confusion about applicable tax-rate etc. (Section 73) or 'short-payment by reason of fraud, or any wilful-misstatement or suppression of facts to evade tax' (Section 74) are key to answer the query.

These are ex facie views of mine and the same should not be construed as professional advice / suggestion.

[Amit Agrawal]

It seems that I hurriedly posted earlier without giving full consideration. On second thoughts, I wish to add following points:

Form ASMT-10 is issued following 'scrutiny of returns'. Section 61 deals with those aspects.

Section 61 (3) reads as follows:

"In case no satisfactory explanation is furnished within a period of thirty days of being informed by the proper officer or such further period as may be permitted by him or where the registered person, after accepting the discrepancies, fails to take the corrective measure in his return for the month in which the discrepancy is accepted, the proper officer may initiate appropriate action including those under section 65 or section 66 or section 67, or proceed to determine the tax and other dues under section 73 or section 74."

Ex-facie, on plain reading of above provision, this means that any acceptance & payment of taxes (with interest as applicable) against Form ASMT-10 in the return for the month in which the discrepancy is accepted by the assessee, Dept. is precluded from taking action 73 or 74. And if so, question of denial of ITC at end of recipient does not arise.

In the context under discussion though not directly relevant & ex-facie, there is no facility to pay penalty u/s 74 while filing return under Form GSTR-3B.

It is just a thought at this stage and need further study. I invite other professional colleagues for arguments in favor as well as against above legal proposition.

It is also interesting to see inter-play between restrictions under Section 39 (9) & facility under Section 61 (3) as well as what Section 73 & 74 stands for, when everything is read together. Furthermore, how / whether scrutiny of return u/s 61 is different from other actions from Dept. such as audit / investigation as well as consequent notice thereof u/s 73 or 74 and if yes, why? And so on.....

I thank the querist for raising the interesting question/s of law.

These are ex facie views of mine and the same should not be construed as professional advice / suggestion.

[KASTURI SETHI]

Dear Sir,

You have mentioned that there is no facility to pay under Section 74. Who will like to pay under Section 74 which is meant for suppression etc. within an intent to evade ? Who will like to invite the trouble on one's own. Here is the question of invocation whether 73 or 74.

[KASTURI SETHI]

It is up to department how it perceives. The burden of proof is cast upon the assessee to prove his/her bona fides in his/her interest.

In view of the issuance of ASMT-10 by the department, the proceedings stand initiated. Hence out of the scope of 'voluntary payment' irrespective of the fact whether tax paid via DRC-03 or GSTR-3B.

[rajkumar shukla]

ASMT10 is to be followed by scn under 73/74.If scn is under 73,voluntary payment can be done within 30 days of scn without penalty.

[Amit Agrawal]

Thanks Shri Kasturi Sethi Ji & Shri Rajkumar Shukla Ji for sharing your further thoughts.

As far as my views are concerned w.r.t. "potential possibilities" shared in post at serial number 5 above, suffice to say that same is still "work in progress" as I have not still made up my mind around answers to various questions (which are way to many) associated with them.

Some more examples of questions breving in mind (which are in addition of earlier list):

A. Difference between language of Section 61 (3) and 'Section 65 (7) / 66 (6)' and questions about why about those differences?

B. Section 66 (1) read with rule 99 where the words ány other amount payable' is specfied. But, Section 66 (3) talks of taking ''corrective measures'' in the return where discrepancies are accepted. Doubt - to my mind - is whether ''corrective measures'' specified in Section 61 (3) means "paying balance taxes (with applicable interest) & treat the issue as çlosed as per plain reading of section 61 (3)" or same also includes penal action u/s 74 (which may be seen as 'preventive measures' ....... or something more than corrective measure). It is worth noting that there is no space to pay penalty u/s 74 while filing return in Form GSTR-3B, where Section 61 (3) requires to take corrective action while filing next return.

C. No doubt and I am well aware that any such reading of Section 61 (3) offers undue advantage to ''cases falling under Section 74'' and Dept. will never accept such views. But, question is ''Whether same is allowed as per plain reading of law / Section 61 (3)"?

Please note that I perfectly understand logic & reasons behind your views and I respect them. Needless to say that my initial reaction -in post at serial number 4 above - resonate with your views completely.

So, idea is not to offend you or anyone else. It is just that I generally check out all potential possibilities (however far-fetched they may sound) thoroughly from all angles before rejecting them. And I feel that this TMI forum is perfect place to get all those possible views.

Any fresh perspective (for / against the potential possibility) - for you as well as other readers - will be more than welcome!

[Amit Agrawal]

Dear Querist,

Can you please tell us whether Form ASMT-10 received by you quantifies amount of short-taxes (i.e. differential tax payable) and / or interest thereon. Also please also inform whether said form also quantifies any other amount as payable (say, penalty u/s 74) which is possibility under Rule 99 of the CGST Rules, 2017.

As can be seen from various views posted earlier, your reasoning / justification for short-payment of taxes holds key to lot of associated issues. Would you please like to share them because if it is bonafide belief / genuine confusion about applicable tax-rate etc., same will help us in solving your problems better.

Lastly, how come Dept. founds about this mistake while scrutinizing return u/s 61? I mean to know:- are these observations - about short-payment - are only on the basis of information submitted while filing Form GSTR-1 or/and Form GSTR-3B etc. (i.e. information on record) or officer asked for more documents / details before arriving at his conclusion?

Thanks and regards,

Amit Agrawal

[MANOHAR KALBURGI]

Thank you all for your valuable opinion, much appreciated.

AI Summary

GST short payment classification under Section 73 or Section 74 determines input tax credit entitlement and payment route. Whether additional GST shown in a departmental debit note should be paid via a demand payment or by correcting the return depends on whether the short payment is treated as a bona fide mistake or as suppression; treatment as suppression denies input tax credit and may attract penalties. Payment following a scrutiny notice is treated as non voluntary, the department will record acceptance, and the taxpayer must establish bona fides to persuade the department to proceed under the less punitive provision so that recipient credit is preserved.